EconPapers    
Economics at your fingertips  
 

Is There a Diversification Discount in Financial Conglomerates?

Luc Laeven () and Ross Levine ()

No 5121, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper investigates whether the diversity of activities conducted by financial institutions influences their market valuations. We find that there is a diversification discount: The market values financial conglomerates that engage in multiple activities, e.g., lending and non-lending financial services, lower than if those financial conglomerates were broken into financial intermediaries that specialize in the individual activities. While difficult to identify a single causal factor, the results are consistent with theories that stress intensified agency problems in financial conglomerates that engage in multiple activities and indicate that economies of scope are not sufficiently large to produce a diversification premium.

Keywords: agency costs; banking; corporate diversification; economies of scope (search for similar items in EconPapers)
JEL-codes: G20 G30 L20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fin, nep-fmk and nep-sea
Date: 2005-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=5121 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Is there a diversification discount in financial conglomerates? (2007) Downloads
Working Paper: Is There a Diversification Discount in Financial Conglomerates? (2005) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:5121

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=5121

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2019-04-18
Handle: RePEc:cpr:ceprdp:5121