The Anatomy of Bank Diversification

Elsas, Ralf; Hackethal, Andreas and Holzhaeuser, Markus (June 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
• Keywords: Bank diversification, organic growth, M&A
• Faculties: Munich School of Management > Discussion Papers; Munich School of Management > Discussion Papers > Finance & Banking; Munich School of Management > Institute for Finance and Banking
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: G21
• Language: English