Asset Details
Do you wish to reserve the book?
Corporate diversification
Hey, we have placed the reservation for you!
By the way, why not check out events that you can attend while you pick your title.
Oops! Something went wrong.
Looks like we were not able to place the reservation. Kindly try again later.
Are you sure you want to remove the book from the shelf?
Corporate diversification
Do you wish to request the book?
Corporate diversification
Please be aware that the book you have requested cannot be checked out. If you would like to checkout this book, you can reserve another copy
We have requested the book for you!
Your request is successful and it will be processed during the Library working hours. Please check the status of your request in My Requests.
Oops! Something went wrong.
Looks like we were not able to place your request. Kindly try again later.
Journal Article
Corporate diversification
2018
Overview
PurposeThe purpose of this study is to compare two theories that relate the proportion of diversified firms in the economy and the implied discount for diversified firms: the first is a real-options model predicting a positive relationship between the discount and management’s choice to operate a diversified firm; the second is based on catering theory, in which a negative relationship is predicted, as management is attentive to investor preference concerning diversified firms.Design/methodology/approachThis study proposes a new aggregate measure of the diversification discount. The authors’ measure allows for decomposition of the discount into firm-level mispricing, industry-level mispricing and long-run fundamental value components.FindingsResults support a catering theory of diversification. The discount appears to be the result of firm-level mispricing. Thus, providing an explanation for why, in light of the observed discount, a large number of diversified firms persist.Originality/valueTo the authors’ knowledge, this is the first study to provide evidence that firm-level mispricing may drive the observed diversification discount.
Publisher
Emerald Group Publishing Limited
Subject
