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Conglomeration versus strategic focus: evidence from the insurance industry

Allen Berger (), John Cummins (), Mary Weiss and Hongmin Zi

No 1999-40, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We use data on U.S. insurance companies to examine the validity of the conglomeration hypothesis versus the strategic focus hypothesis for financial institutions. We distinguish between the hypotheses using profit scope economies, which measures the relative efficiency of joint versus specialized production, taking both costs and revenues into account. The results suggest that the conglomeration hypothesis dominates for some types of financial service providers and the strategic focus hypothesis dominates for other types. This may explain the empirical puzzle of why joint producers and specialists both appear to be competitively viable in the long run.

Keywords: Financial services industry; Insurance industry; Consolidation and merger of corporations (search for similar items in EconPapers)
Date: 1999, Revised 1999
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-ind
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Related works:
Journal Article: Conglomeration versus Strategic Focus: Evidence from the Insurance Industry (2000) Downloads
Working Paper: Conglomeration Versus Strategic Focus: Evidence from the Insurance Industry (2000) Downloads
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