Financial conglomeration: efficiency, productivity and strategic drive

Barbara Casu and Claudia Girardone

Applied Financial Economics, 2004, vol. 14, issue 10, 687-696

Abstract: Consolidation in the global banking industry has resulted in the emergence of financial conglomerates that conduct an extensive range of businesses with a group structure. To date, few studies have investigated the performance features of such groups. This study aims to extend the literature by evaluating the cost and profit efficiency and productivity change of Italian financial conglomerates during the 1990s using both parametric and nonparametric approaches. The impact of diversification and growth strategies on cost and profit efficiency is also investigated. The results seem to indicate that Italian banking groups have benefited from a consistent improvement in profit efficiency, while they have not experienced a clear increase in cost efficiency. Indeed, profit efficient banking groups display a high risk-high return profile.

Date: 2004
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DOI: 10.1080/0960310042000243529

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