Divestitures and the Financial Conglomerate Excess Value

Posted: 26 May 2017 Last revised: 29 Apr 2018

See all articles by Claudia Curi

Claudia Curi

Free University of Bolzano-Bozen, Faculty of Economics and Management

Maurizio Murgia

Free University of Bolzano-Bozen Faculty of Economics and Management

Date Written: April 5, 2018

Abstract

We study a sample of the world’s largest financial conglomerates from 15 countries and we track their largest divestitures over the period 2005-2016. We develop a novel market-based metric to analyse the impact of divestitures on financial conglomerate excess value, and our findings point to divestitures having a significant impact on financial conglomerate valuation, contributing to a reduced conglomerate discount. Our results are driven by sales of financial service assets. Selling assets unrelated to the financial sector has no significant effect on conglomerate excess value. These results are robust with the inclusion of multiple control variables and alternative econometric model specifications. Altogether these results cast doubts on the existence of large benefits for financial conglomerates from combining financial service activities. This study has implications both for financial conglomerate boards who might direct their strategies to downsize their firms, and for regulators who address issues related to financial stability.

Keywords: financial conglomerates; conglomerate discount; excess value; divestiture; financial crises

JEL Classification: G21; G22; G24; G32; G34; L2

Suggested Citation

Curi, Claudia and Murgia, Maurizio, Divestitures and the Financial Conglomerate Excess Value (April 5, 2018). Journal of Financial Stability, Vol. 36, 2018, Available at SSRN: https://ssrn.com/abstract=2973765 or http://dx.doi.org/10.2139/ssrn.2973765

Claudia Curi (Contact Author)

Free University of Bolzano-Bozen, Faculty of Economics and Management ( email )

Universitätsplatz 1-Piazza Università 1
Bozen-Bolzano, Bolzano 39100
Italy
+39 0471 13498 (Phone)

Maurizio Murgia

Free University of Bolzano-Bozen Faculty of Economics and Management ( email )

Piazza Universita' 1
Bolzano-Bozen, Bolzano 39100
Italy
+390471013110 (Phone)
+390471013009 (Fax)

HOME PAGE: http://www.unibz.it/academicstaff/mmurgia

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