TY  - JOUR
AU  - Laeven,Luc
AU  - Levine,Ross
TI  - Is There a Diversification Discount in Financial Conglomerates?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11499
PY  - 2005
Y2  - August 2005
UR  - http://www.nber.org/papers/w11499
L1  - http://www.nber.org/papers/w11499.pdf
N1  - Author contact info:
Luc Laeven
Senior Economist
International Monetary Fund
700 19th Avenue, NW
Washington, DC 20431
Tel: 202/623-9020
Fax: 202/623-4740
E-Mail: Llaeven@imf.org

Ross Levine
Department of Economics
Brown University
64 Waterman Street
Providence, RI 02912
Tel: 401/863-2170
E-Mail: ross_levine@brown.edu
M2  - featured in NBER digest on 2005-08-01
AB  - 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 results are consistent with theories that stress intensified agency problems in
financial conglomerates that engage in multiple activities and indicate that economies of scope are
not sufficiently large to produce a diversification premium.
ER  -