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The Anatomy of Bank Diversification

  • Elsas, Ralf
  • Hackethal, Andreas
  • Holzhaeuser, Markus
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    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: https://epub.ub.uni-muenchen.de/1167/1/ehh_lmu_0906.pdf
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    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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    18. Lewellen, Wilbur G, 1971. "A Pure Financial Rationale for the Conglomerate Merger," Journal of Finance, American Finance Association, vol. 26(2), pages 521-37, May.
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    22. Meyer, Margaret & Milgrom, Paul & Roberts, John, 1992. "Organizational Prospects, Influence Costs, and Ownership Changes," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(1), pages 9-35, Spring.
    23. Boyd, John H. & Graham, Stanley L. & Hewitt, R. Shawn, 1993. "Bank holding company mergers with nonbank financial firms: Effects on the risk of failure," Journal of Banking & Finance, Elsevier, vol. 17(1), pages 43-63, February.
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    25. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
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