search query: @indexterm CONGLOMERATE COMPANIES / total: 223
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| Author: | Laeven, L. Levine, R. |
| Title: | Is there a diversification discount in financial conglomerates? |
| Journal: | Journal of Financial Economics
2007 : AUG, VOL. 85:2, p. 331-367 |
| Index terms: | banking conglomerate companies diversification |
| Language: | eng |
| Abstract: | The article studies whether the diversity of activities conducted by financial institutions influences their market valuations. It is found that there is a diversification discount: the market values of financial conglomerates that engage in multiple activities, e.g., lending and non-lending financial services, are 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 engaged in multiple activities and indicate that economies of scope are not sufficiently large to produce a diversification premium. |
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