Abstract
The objective of this paper is to investigate the shape of the relationship between internationalization and performance of the world largest financial institutions. International diversification in several countries is expected to have a significant impact on the performance but also on the overall variability of the performance over time. The paper documents the relative importance of the largest financial groups in the world. The empirical analysis over the period 2003-2006 may have important implications for the structure of global financial markets. It suggests that performance considerations may limit the global consolidation of financial institutions if profitability decreases when size increases after a certain threshold. Furthermore, the ability to operate efficiently across borders appears to be linked to specialization rather than the nation of ownership or the size of the home market.
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