The paper suggests that when firms differ stochastically in their productivity, a bank may find it optimal not to bail out the failed nonconglomerate firms at all, but to bail out conglomerates fully. Expectation of such bailout policy may encourage risk-averse firms to join a conglomerate to...

Belgian financial conglomerates (FCs) remained important players in the Belgian financial sector, despite significant restructuring following the global financial crisis. FCs operated in multiple streams of the financial sector, especially in banking and insurance. Owing to their economic reach...