Is There a Diversification Discount in Financial Conglomerates?

  title={Is There a Diversification Discount in Financial Conglomerates?},
  author={L. Laeven and R. Levine},
  journal={IO: Empirical Studies of Firms & Markets},
  • L. Laeven, R. Levine
  • Published 2005
  • Economics, Business
  • IO: Empirical Studies of Firms & Markets
  • This paper investigates whether the diversity of activities conducted by financial institutions influences their market valuations. We find that there is a diversification discount: The market values financial conglomerates that engage in multiple activities, e.g., lending and non-lending financial services, lower than if those financial conglomerates were broken into financial intermediaries that specialize in the individual activities. While difficult to identify a single causal factor, the… CONTINUE READING
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