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| Author: | Estrella, A. |
| Title: | Mixing and matching: Prospective financial sector mergers and market valuation |
| Journal: | Journal of Banking and Finance
2001 : DEC, VOL. 25:12, p. 2367-2392 |
| Index terms: | DIVERSIFICATION OPTION PRICES ARBITRAGE ARBITRAGE PRICING THEORY |
| Language: | eng |
| Abstract: | The author answers the question which types of mergers are likely to be most productive for banks and other financial firms in the US. From a management perspective, mixing disparate firms may be difficult, but may offer significant gains from diversification. The opposite applies to matching similar firms. This paper considers life insurance, property and casualty insurance, securities, and commercial firms as potential matches for banks. It examines a measure of diversification gains from potential consolidation, based on option pricing, and a model of the "building blocks" of the industries, based on arbitrage pricing theory. |
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