Valuing Financial Conglomerates: Stylised factors and new evidence from financial crises
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Recent research questions whether diversification in financial conglomerates enhances or destroys shareholder value, thus whether financial conglomerates trade at premium or discount compared to specialized banks. Empirical evidence shows that prior to the financial crisis, there existed substantial and persistent conglomerate discount among financial intermediaries. However, the global financial crisis of 2008–2009 and the European debt crisis of 2010-2011 have sparked off an active debate among financial economists about the so-called “diversification discount” or lack thereof, as the value of diversification might have changed, and if so, why. The aim of this book is to provide an innovative analysis of the financial conglomerate phenomenon by combining both theoretical and empirical research methods. Moreover, new empirical evidence of the impact of diversification during the 2008-2009 and 2010-2011 financial crises on the shareholder value is presented. The book also discusses current issues and future directions for research.
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