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Cited by 432

The DOI matches its Crossref record; 34 of the 34 references it cites were found in a registry or an index.

Is It Inefficient Investment that Causes the Diversification Discount?

Whited, Toni M.·2001·The Journal of Finance
DOI 10.1111/0022-1082.00385
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Abstract

Diversified conglomerates are valued less than matched portfolios of pure‐play firms. Recent studies find that this diversification discount results from conglomerates' inefficient allocation of capital expenditures across divisions. Much of this work uses Tobin's q as a proxy for investment opportunities, therefore hypothesizing that q is a good proxy. This paper treats measurement error in q. Using a measurement‐error consistent estimator on the sorts regressions in the literature, I find no evidence of inefficient allocation of investment. The results in the literature appear to be artifacts of measurement error and of the correlation between investment opportunities and liquidity.

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Metadata

Authors
Whited, T. M.
Venue
The Journal of Finance
Publisher
Wiley
Published
2001-10
Volume
56
Issue
5
Pages
1667-1691
ISSN
  • 0022-1082 (ISSN-L)
  • 1540-6261
DOI
10.1111/0022-1082.00385
OpenAlex
W2164145704
Cited by
432
References
34
FWCI
108.82
Type
journal article
Language
en
Open access
closed

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CoChat. (2026). Citation check: Is It Inefficient Investment that Causes the Diversification Discount? https://app.cochat.ai/papers/10.1111/0022-1082.00385
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Whited, T. M. (2001). Is It Inefficient Investment that Causes the Diversification Discount? The Journal of Finance. https://doi.org/10.1111/0022-1082.00385

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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).

Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.