The Anatomy of Bank Diversification

Elsas, Ralf and Hackethal, Andreas and Holzhaeuser, Markus (2006): The Anatomy of Bank Diversification. Discussion Papers in Business Administration 2006-1

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.

• Item Type: Paper (Discussion Paper)
• Keywords: Bank diversification, organic growth, M&A
• Collections: Munich School of Management; Munich School of Management > Discussion Papers; Munich School of Management > Discussion Papers > Finance & Banking
• Subjects: 300 Social sciences > 300 Social sciences, sociology and anthropology; 300 Social sciences > 330 Economics
• JEL Classification: G21
• Language: English