Asset Sales and the Financial Conglomerate Discount
This study investigates whether large divestitures have an impact on financial conglomerate valuation and contribute to reduce the conglomerate discount. Based on a unique sample of the world largest financial conglomerates at year-end 2005 from 15 countries, we track their largest asset sales over the years 2005-2013. We find that disposing assets has a positive impact on the conglomerate excess value and that diversification discount declines during years of financial crises. Sale of assets unrelated to financial services shows the stronger effect on the conglomerate excess value. This study has implications both for the incentives to shareholders to downsize financial conglomerate assets and for regulators to address issues related to the financial stability.
Area: Banking
Keywords: financial conglomerates, conglomerate discount, excess value, asset sales
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