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Do multinational banks create or destroy shareholder value?

Gulamhussen, Azzim
Pinheiro, Carlos
Pozzolo, Alberto Franco
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Publication Type
Journal article
Editor
Supervisor
Publication Year
2017
Journal
Financial Markets Institutions and Instruments
Book
Publication Volume
26
Publication Issue
5
Publication Begin page
295
Publication End page
313
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Abstract
We question whether the international diversification of multinational banks creates or destroys shareholder value. Based on a sample of 384 listed banks from 56 countries we provide new and robust evidence that bank cross-border activities create shareholder value, as shown by an economically and statistically significant premium for international diversification. Our results are confirmed controlling for bank fixed effects, time-varying bank characteristics, reverse causality, functional diversification, and instrumenting for the choice to expand abroad. The increase in shareholder value is slightly larger for banks in the middle range of international diversification and in the case of expansion towards less developed countries.
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Keywords
Accounting & Finance, Financial Institutions, Foreign Direct Investment, Banks, Tobin's q
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