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Product scope adjustment is a key mechanism through which multi-product firms achieve efficient resource allocations. In this paper, we take a novel perspective to study firms’ product scope adjustment behavior through the lens of asset pricing. Using a unique panel scanner data set containing detailed information on products, matched with the financial information of their manufacturers, we find that multi-product firms with higher product turnover have lower financial risks and lower risk premia. To understand this channel, we propose a stylized model with a time-dependent (Calvo-type) product turnover rate to highlight the ’risk absorption channel’ of product scope adjustment. In response to an economy-wide shock, a firm that can adjust its product scope more flexibly shows lower excess equity returns and lower asset volatility.

Prices --- Capital assets pricing model --- Risk management --- Insurance --- Management --- Capital asset pricing model --- CAPM (Capital assets pricing model) --- Pricing model, Capital assets --- Capital --- Finance --- Investments --- Econometric models --- Mathematical models --- E-books --- Investments: Stocks --- Macroeconomics --- Production, Pricing, and Market Structure --- Size Distribution of Firms --- Business Objectives of the Firm --- Firm Performance: Size, Diversification, and Scope --- Industry Studies: Manufacturing: General --- Macroeconomics: Consumption --- Saving --- Wealth --- Labor Economics: General --- Price Level --- Inflation --- Deflation --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Aggregate Factor Income Distribution --- Labour --- income economics --- Investment & securities --- Consumption --- Labor --- Asset prices --- Stocks --- Income --- National accounts --- Financial institutions --- Economics --- Labor economics --- United States

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The Global Financial Crisis unleashed changes in the operating and regulatory environments for large international banks. This paper proposes a novel taxonomy to identify and track business model evolution for the 30 Global Systemically Important Banks (G-SIBs). Drawing from banks’ reporting, it identifies strategies along four dimensions –consolidated lines of business and geographic orientation, and the funding models and legal entity structures of international operations. G-SIBs have adjusted their business models, especially by reducing market intensity. While G-SIBs have maintained international orientation, pressures on funding models and entity structures could affect the efficiency of capital flows through the bank channel.

United States --- Accounting --- Banks and Banking --- Industries: Financial Services --- International Financial Markets --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Business Objectives of the Firm --- International Finance: Other --- Financial Institutions and Services: General --- Public Administration --- Public Sector Accounting and Audits --- Investment Banking --- Venture Capital --- Brokerage --- Ratings and Ratings Agencies --- Financial Institutions and Services: Government Policy and Regulation --- Banking --- Finance --- Financial reporting, financial statements --- Global systemically important banks --- Foreign banks --- Financial statements --- Investment banking --- Financial institutions --- Public financial management (PFM) --- Financial services --- Banks and banking --- Financial services industry --- Banks and banking, Foreign --- Finance, Public