Firm Structure in Banking and Finance: Is Broader Better?

27 Pages Posted: 1 Dec 2017

See all articles by Markus Schmid

Markus Schmid

University of St. Gallen - Swiss Institute of Banking and Finance; University of St. Gallen - School of Finance

Ingo Walter

New York University - Leonard N. Stern School of Business; New York University (NYU) - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: July 28, 2014

Abstract

A focal point in strategic and regulatory debates about the pros and cons of diversification among financial institutions continues to be the issue of economies of scope in financial intermediation. In this paper, we summarize the theoretical research on the value of diversification in financial services firms, and survey the empirical research so far on the conglomerate discount in U.S. and international financial services businesses. We also review research on the internal capital market efficiency of universal banks and financial conglomerates. The paper provides new empirical evidence on the conglomerate discount in U.S. financial intermediaries and how that changes between non-crisis and crisis periods, showing a decline in the discount under turbulent conditions.

Suggested Citation

Schmid, Markus and Walter, Ingo, Firm Structure in Banking and Finance: Is Broader Better? (July 28, 2014). Journal of Financial Perspectives, Vol. 2, No. 2, 2014. Available at SSRN: https://ssrn.com/abstract=3079454

Markus Schmid (Contact Author)

University of St. Gallen - Swiss Institute of Banking and Finance ( email )

Rosenbergstrasse 52
St. Gallen, 9000
Switzerland

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Ingo Walter

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY 10012
United States
212-998-0707 (Phone)
212-995-4220 (Fax)

New York University (NYU) - Department of Finance

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

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