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The Anatomy of Bank Diversification

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  • Elsas, Ralf
  • Hackethal, Andreas
  • Holzhaeuser, Markus
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    Abstract

    We use panel data from nine countries over the period 1996 to 2003 to test how revenue diversi-fication in conjunction with increasing bank size affects bank value. Using a comprehensive framework for bank performance measurement, we find no evidence for a conglomerate discount, unlike studies concerned with industrial firms. Rather, revenue diversification increases bank profitability and is associated with higher market valuation. This performance effect does not depend on whether diversification was achieved through organic growth or through M&A activity.

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    File URL: http://epub.ub.uni-muenchen.de/1167/1/ehh_lmu_0906.pdf
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    Bibliographic Info

    Paper provided by University of Munich, Munich School of Management in its series Discussion Papers in Business Administration with number 1167.

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    Date of creation: Jun 2006
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    Handle: RePEc:lmu:msmdpa:1167

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    Keywords: Bank diversification; organic growth; M&A;

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    Cited by:
    1. Schwaiger, Markus & Liebeg, David, 2006. "Determinants of the Interest Rate Margins of Austrian Banks," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 12.
    2. Beckmann, Rainer, 2007. "Profitability of Western European banking systems: panel evidence on structural and cyclical determinants," Discussion Paper Series 2: Banking and Financial Studies 2007,17, Deutsche Bundesbank, Research Centre.
    3. Robert DeYoung & Douglas Evanoff & Philip Molyneux, 2009. "Mergers and Acquisitions of Financial Institutions: A Review of the Post-2000 Literature," Journal of Financial Services Research, Springer, vol. 36(2), pages 87-110, December.

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