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ORGANIZATIONAL STRUCTURE AND THE DIVERSIFICATION DISCOUNT: EVIDENCE FROM COMMERCIAL BANKING -super-

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  • PETER G. KLEIN
  • MARC R. SAIDENBERG

Abstract

We provide evidence on organizational structure and performance at bank holding companies (BHC's). First, we show that a BHC's member banks benefit from access to internal capital markets. Second, we ask if these benefits are best realized within loosely structured, decentralized organizations or more consolidated, centralized firms. We find that BHC's with many subsidiaries are less profitable and have lower q ratios than similar BHC's with fewer subsidiaries. However, because we study multi-unit firms in a single industry, our results suggest that the diversification discount reported in the corporate finance literature reflects not only industry diversification, but also organizational structure. Copyright 2010 The Authors. Journal compilation 2010 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.

Suggested Citation

  • Peter G. Klein & Marc R. Saidenberg, 2010. "ORGANIZATIONAL STRUCTURE AND THE DIVERSIFICATION DISCOUNT: EVIDENCE FROM COMMERCIAL BANKING -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 58(1), pages 127-155, March.
  • Handle: RePEc:bla:jindec:v:58:y:2010:i:1:p:127-155
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    References listed on IDEAS

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    Cited by:

    1. K. S. Manikandan & J. Ramachandran, 2015. "Beyond institutional voids: Business groups, incomplete markets, and organizational form," Strategic Management Journal, Wiley Blackwell, vol. 36(4), pages 598-617, April.
    2. Mostak Ahamed, M., 2017. "Asset quality, non-interest income, and bank profitability: Evidence from Indian banks," Economic Modelling, Elsevier, vol. 63(C), pages 1-14.
    3. Dombret Andreas & Liebig Thilo & Stein Ingrid, 2014. "Trennbankensystem – ein Weg zu mehr Finanzstabilität in Deutschland?," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 15(1), pages 41-55, February.
    4. repec:ebl:ecbull:eb-17-00597 is not listed on IDEAS
    5. Löffler, Clemens & Pfeiffer, Thomas, 2013. "Centralized versus Decentralized External Financing, Winner Picking and Corporate Socialism," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79902, Verein für Socialpolitik / German Economic Association.
    6. repec:eee:jbfina:v:80:y:2017:i:c:p:203-214 is not listed on IDEAS

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