 The financial conglomerate discount: Insights from stock return skewnessSilvia Bressan and Alex Weissensteiner International Review of Financial Analysis, 2021, vol. 74, issue C Abstract: Diversified banks (i.e. financial conglomerates) trade often at a discount compared to matched portfolios of specialized stand-alone banks. The existing research explains this evidence primarily with inefficiencies in the cash flow management of banks. This article analyzes the financial conglomerate discount by focusing on the role of expected returns approximated by measures of stock return skewness. Our empirical findings support the hypothesis that diversified banks have less skewed stock returns, i.e. they are more likely to perform badly than non-diversified banks. Due to the lower skewness exposure investors demand higher future returns, thereby lowering corporate value. Although the conglomerate puzzle is observed across industries, the previous literature examines banks separately, as the financial industry is hardly comparable to other sectors. We follow this field of research and show that huge banks quote at a discount as diversification into investment banking activities affects negatively the corporate performance. Keywords: Financial conglomerates; Discount; Expected returns; Skewness (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:74:y:2021:i:c:s1057521921000065 DOI: 10.1016/j.irfa.2021.101662 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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