Does diversification destroy value?: Evidence from industry shocks
Опубликовано на портале: 02-10-2003
Journal of Financial Economics.
2002.
Vol. 63.
No. 1.
P. 51-77.
Тематический раздел:
Does corporate diversification reduce shareholder value? Since firms endogenously
choose to diversify, exogenous variation in diversification is necessary in order
to draw inferences about the causal effect. We examine changes in the within-firm
dispersion of characteristics, or "diversity." Following the inefficient internal
capital markets hypothesis, we examine investment diversity. We find that exogenous
changes in diversity, due to changes in industry investment, are negatively related
to changes in firm value. Thus diversification destroys value. This finding is not
caused by measurement error. We also find that exogenous changes in industry cash
flow diversity are negatively related to changes in firm value
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