Do financial conglomerates create or destroy economic value?

Journal of Financial Intermediation

Volumn 18, Issue 2, 2009, Pages 193-216

  Schmid, Markus M ^a   Walter, Ingo ^b  

^a UNIVERSITY OF ST GALLEN   (Switzerland)

^b NEW YORK UNIVERSITY   (United States)

Author keywords

Diversification; Financial sector; Firm valuation; Focus; Organizational structure

Indexed keywords

EID: 61449268115     PISSN: 10429573     EISSN: 10960473     Source Type: Journal    
DOI: 10.1016/j.jfi.2008.07.002     Document Type: Article

References (33)

1. Ahn S., Denis D.J., and Denis D.K. Leverage and investment in diversified firms. J. Finan. Econ. 79 (2006) 317-337
2. Berger P.G., and Hann R. The impact of SFAS No. 131 on information and monitoring. J. Acc. Res. 41 (2003) 163-223
3. Berger A.N., and Humphrey D.B. Measurement and efficiency issues in commercial banking. In: Griliches Z. (Ed). Output Measurement in the Service Sector (1992), University of Chicago Press, Chicago 245-299
4. Berger P.G., and Ofek E. Diversification's effect on firm value. J. Finan. Econ. 37 (1995) 39-65
5. Boyd J., Graham S., and Hewitt R.S. Bank holding company mergers with non-bank financial firms: Effects on the risk of failure. J. Finan. Econ. 17 (1993) 43-63
6. Campa J.M., and Kedia S. Explaining the diversification discount. J. Finance 57 (2002) 1731-1762
7. Comment R., and Jarrell G.A. Corporate focus and stock returns. J. Finan. Econ. 37 (1995) 67-87
8. Coyne, K.P., Mendonca, L.T., Wilson, G., 2004. Can banks grow beyond M&A? McKinsey Quarterly, 27 April
9. DeLong G. Stockholder gains from focusing versus diversifying bank mergers. J. Finan. Econ. 59 (2001) 221-252
10. Denis D.J., Denis D.K., and Sarin A. Agency problems, equity ownership, and corporate diversification. J. Finance 52 (1997) 135-160
11. Denis D.J., Denis D.K., and Yost K. Global diversification, industrial diversification, and firm value. J. Finance 57 (2002) 1951-1979
12. Fauver L., Houston J.F., and Naranjo A. Cross-country evidence on the value of corporate industrial and international diversification. J. Corp. Finance 10 (2004) 729-752
13. Graham J., Lemmon M., and Wolf J. Does corporate diversification destroy value?. J. Finance 57 (2002) 695-720
14. Hart O., and Moore J. Debt and seniority-An analysis of the role of hard claims in constraining management. Amer. Econ. Rev. 85 (1995) 567-585
15. Heckman J. Sample selection bias as specification error. Econometrica 47 (1979) 153-161
16. Houston J., James C., and Ryngaert M. Where do merger gains come from? Bank mergers from the perspective of insiders and outsiders. J. Finan. Econ. 60 (2001) 285-331
17. Jensen M. Agency costs of free cash flow, corporate finance, and takeovers. Amer. Econ. Rev. 76 (1986) 323-329
18. Laeven L., and Levine R. Is there a diversification discount in financial conglomerates?. J. Finan. Econ. 85 (2007) 331-367
19. Lang L.H.P., and Stulz R.M. Tobin's Q, corporate diversification, and firm performance. J. Polit. Econ. 102 (1994) 1248-1280
20. Lewellen W. A pure financial rationale for the conglomerate merger. J. Finance 26 (1971) 521-537
21. Lins K., and Servaes H. International evidence on the value of corporate diversification. J. Finance 54 (1999) 2215-2239
22. Lown C.S., Osler C.L., Strahan P.E., and Sufi A. The changing landscape of the financial services industry: What lies ahead?. Federal Reserve Bank of New York Economic Policy Review (2000) 39-55 (October)
23. McConnell J., and Servaes H. Equity ownership and the two faces of debt. J. Finan. Econ. 39 (1995) 131-157
24. McKinsey Global Institute, 2007. Mapping the global capital markets: Third annual report. Available at: http://www.mckinsey.com/mgi/publications/third_annual_report/index.asp
25. Mitchell K., and Onvural N. Economies of scale and scope at large commercial banks: Evidence from the Fourier flexible functional form. J. Money, Credit, Banking 28 (1996) 178-199
26. Santomero A., and Chung E.J. Evidence in support of broader bank powers. Finan. Markets, Inst. Instruments 1 (1992) 1-69
27. Saunders A., and Walter I. Universal Banking in the US (1994), Oxford University Press, New York
28. Stiroh K.J., and Rumble A. The dark side of diversification: The case of US financial holding companies. J. Banking Finance 30 (2006) 2131-2161
29. Stulz R. Managerial discretion and optimal financing policies. J. Finan. Econ. 26 (1990) 3-27
30. Villalonga B. Does diversification cause the diversification discount?. Finan. Manage. 33 (2004) 5-27
31. Walter I. Mergers and Acquisitions in Banking and Finance (2004), Oxford University Press, New York
32. Yermack D. Higher market valuation of companies with a small board of directors. J. Finan. Econ. 40 (1996) 185-211
33. Yu, L., 2003. On the wealth and risk effects of the Glass-Steagall overhaul: Evidence from the stock market. Unpublished manuscript, Stern School of Business, New York University