Transformation of Corporate Scope in U.S. Banks: Patterns and Performance Implications

54 Pages Posted: 1 Jun 2017

See all articles by Nicola Cetorelli

Nicola Cetorelli

Federal Reserve Bank of New York

Michael G. Jacobides

London Business School

Samuel Stern

University of Michigan at Ann Arbor - Department of Economics, Students

Date Written: 2017-05-01

Abstract

Using a novel database containing the time-series details of the organizational structure of individual bank holding companies, this paper presents the first population-wide study of the transformation in business scope of U.S. banks. Expanding scope has a negative impact on performance on average. However, we find that firms whose expansion keeps them closer to the prevailing “modal bank” are better off compared with those pursuing generic diversification. Moreover, we find that early expanders into particular activities benefit more, whereas late adopters, rather than benefitting by “fitting the norm,” lose out.

Keywords: business scope, performance, diversification

JEL Classification: G21, L22, L25

Suggested Citation

Cetorelli, Nicola and Jacobides, Michael G. and Stern, Samuel, Transformation of Corporate Scope in U.S. Banks: Patterns and Performance Implications (2017-05-01). FRB of NY Staff Report No. 813, Available at SSRN: https://ssrn.com/abstract=2977857

Nicola Cetorelli (Contact Author)

Federal Reserve Bank of New York ( email )

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HOME PAGE: http://nyfedeconomists.org/cetorelli/

Michael G. Jacobides

London Business School ( email )

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HOME PAGE: http://faculty.london.edu/mjacobides/

Samuel Stern

University of Michigan at Ann Arbor - Department of Economics, Students ( email )

Ann Arbor, MI
United States

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