Insead Business School – Case Study
M&A – Do Financial Conglomerates Create or Destroy Economic Value?

con análisis y comentarios de Eduardo Petracca
INSEAD Business School – Case Study
Publicado en revista «Management Herald»

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Two of the enduring issues concerning the industrial organization of financial intermediation relate to scale and scope. Is bigger better? Is broader better? And is broader by function better than broader by geography? Or the reverse? A great deal of research has focused on scale, but much less work has been done on scope. In this working paper, Markus M Schmid from the Department of Finance, University of Basel, and Ingo Walter, Seymour Milstein Professor of Finance, Corporate Governance and Ethics at the Stern School of Business, New York University, and Visiting Professor of International Management at INSEAD, fill a gap in the literature with their study of diversification in the financial services sector.

One of the key aspects of the debate on scope in the financial services sector is whether or not broader functional and geographical scope is value-enhancing or value-destroying. The degree of diversification can change as a firm buys or sells assets, moves into new business segments, grows differentially in existing business segments, or moves into new geographical areas. The rapid expansion worldwide of M&A activity in the financial services sector between 1985 and 2005 indicates the attraction of diversification – with M&A transactions either increasing a firm’s market share, defined functionally or geographically, or increasing its business geographical scope.

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