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ORGANIZATIONAL STRUCTURE AND THE DIVERSIFICATION DISCOUNT: EVIDENCE FROM COMMERCIAL BANKING *
Author(s) -
KLEIN PETER G.,
SAIDENBERG MARC R.
Publication year - 2010
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.1467-6451.2010.00409.x
Subject(s) - diversification (marketing strategy) , subsidiary , business , organizational structure , capital structure , strategic business unit , industrial organization , unit (ring theory) , organizational economics , banking industry , finance , financial system , monetary economics , marketing , economics , microeconomics , management , debt , multinational corporation , mathematics education , mathematics
We provide evidence on organizational structure and performance at bank holding companies (BHC's). First, we show that a BHC's member banks benefit from access to internal capital markets. Second, we ask if these benefits are best realized within loosely structured, decentralized organizations or more consolidated, centralized firms. We find that BHC's with many subsidiaries are less profitable and have lower q ratios than similar BHC's with fewer subsidiaries. However, because we study multi‐unit firms in a single industry, our results suggest that the diversification discount reported in the corporate finance literature reflects not only industry diversification, but also organizational structure.