The Anatomy of Bank Diversification
Ludwig-Maximilians-Universität Munich - Faculty of Business Administration (Munich School of Management)
Goethe University Frankfurt - Department of Finance
Goethe University Frankfurt - Finance Department
We use panel data from nine countries over the period 1996 to 2003 to test how revenue diversification in conjunction with increasing bank size affects bank value. Using a comprehensive framework for bank performance measurement, we find no evidence for a conglomerate discount, unlike studies concerned with industrial firms. Rather, revenue diversification increases bank profitability and is associated with higher market valuation. This performance effect does not depend on whether diversification was achieved through organic growth or through M&A activity.
Number of Pages in PDF File: 28
Keywords: Bank Diversification, Conglomerate Discount, Universal Banking
JEL Classification: G24, G21, G34working papers series
Date posted: March 9, 2007
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