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The Value of Diversification During the Conglomerate Merger Wave
Abstract
The current trend toward corporate focus reverses the diversification trend of the late 1960s and early 1970s. This article examines the value of diversification when many corporations started to diversify. I find no evidence that diversified companies were valued at a premium over single segment firms during the 1960s and 1970s. On the contrary, there was a large diversification discount during the 1960s, but this discount declined to zero during the 1970s. Insider ownership was negatively related to diversification during the 1960s, but when the diversification discount declined, firms with high insider ownership were the first to diversify.
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Cites
Corporate financing and investment decisions when firms have information that investors do not have
Myers, S. C., & Majluf, N. S. (1984) · Journal of Financial Economics · doi:10.1016/0304-405x(84)90023-0 · Cited by 18,957
Cited by
Who makes acquisitions? CEO overconfidence and the market's reaction☆
MALMENDIER, U., & TATE, G. (2008) · Journal of Financial Economics · doi:10.1016/j.jfineco.2007.07.002 · Cited by 2,754
Financial accounting information, organizational complexity and corporate governance systems
Bushman, R., Chen, Q., Engel, E., & Smith, A. (2004) · Journal of Accounting and Economics · doi:10.1016/j.jacceco.2003.09.005 · Cited by 1,059
Global Diversification, Industrial Diversification, and Firm Value
Denis, D. J., Denis, D. K., & Yost, K. (2002) · The Journal of Finance · doi:10.1111/0022-1082.00485 · Cited by 1,049
Are Internal capital Markets Efficient?
Shin, H.-H., & Stulz, R. M. (1998) · The Quarterly Journal of Economics · doi:10.1162/003355398555676 · Cited by 1,048
Is It Inefficient Investment that Causes the Diversification Discount?
Whited, T. M. (2001) · The Journal of Finance · doi:10.1111/0022-1082.00385 · Cited by 432
Metadata
- Authors
- SERVAES, H.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 1996-09
- Volume
- 51
- Issue
- 4
- Pages
- 1201-1225
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2138616178
- Cited by
- 878
- References
- 1
- FWCI
- 83.95
- Type
- journal article
- Language
- en
- Open access
- closed
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- SERVAES, H. (1996). The Value of Diversification During the Conglomerate Merger Wave. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.1996.tb04067.x
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
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.
