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Risk-adjusted performance measures at bank holding companies with section 20 subsidiaries

Victoria Geyfman

No 05-26, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: This paper examines risk-adjusted performance measures in banking, which are used as a guide for efficient asset allocation, performance evaluation, and capital structure decisions in complex, multidivisional financial institutions. Traditional measures of performance are contrasted with the portfolio-based risk-adjusted measures using a unique detailed micro data set for a sample of domestic bank holding companies (BHCs) that engaged in both commercial banking and investment banking activities between 1990 and 1999. This paper finds evidence that traditional stand-alone performance measures can lead to results substantially different from those of the portfolio models. This study also examines BHCs? optimal portfolios consisting of traditional and nontraditional banking activities derived from the efficient frontiers. These results show that there are gains from diversification as indicated by the composition of optimal portfolios.

Keywords: Bank holding companies; Risk management (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-rmg
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Citations: View citations in EconPapers (1)

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