This paper investigates whether the diversity of activities conducted by financial institutions influences their market valuations. The authors find that financial conglomerates, which engage in multiple activities such as lending and non-lending financial services, are valued lower than if these activities were performed by specialized financial intermediaries. This "diversification discount" suggests that intensified agency problems within financial conglomerates, where insiders and small shareholders have conflicting interests, outweigh any potential economies of scope from diversification. The study uses a modified version of the "chop-shop" method to compare the market valuations of diversified banks with those of specialized banks, controlling for various factors to isolate the impact of diversity on valuation. The results are robust across different econometric methods and country samples, indicating that the costs of diversification, such as increased agency problems, outweigh any benefits from economies of scope.This paper investigates whether the diversity of activities conducted by financial institutions influences their market valuations. The authors find that financial conglomerates, which engage in multiple activities such as lending and non-lending financial services, are valued lower than if these activities were performed by specialized financial intermediaries. This "diversification discount" suggests that intensified agency problems within financial conglomerates, where insiders and small shareholders have conflicting interests, outweigh any potential economies of scope from diversification. The study uses a modified version of the "chop-shop" method to compare the market valuations of diversified banks with those of specialized banks, controlling for various factors to isolate the impact of diversity on valuation. The results are robust across different econometric methods and country samples, indicating that the costs of diversification, such as increased agency problems, outweigh any benefits from economies of scope.