search query: @author Maksimovic, V. / total: 17
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| Author: | Maksimovic, V. Phillips, G. |
| Title: | Do conglomerate firms allocate resources inefficiently across industries? Theory and evidence |
| Journal: | Journal of Finance
2002 : APR, VOL. 57:2, p. 721-767 |
| Index terms: | Conglomerate companies Resource allocation Profit Efficiency Models USA |
| Language: | eng |
| Abstract: | This paper develops a profit-maximizing neoclassical model of optimal firm size and growth across different industries, based on differences in industry fundamentals and firm productivity. In the model, conglomerate discount is consistent with profit maximization. The model predicts how conglomerate firms will allocate resources across divisions over the business cycle and now their responses to industry shocks will differ from those of single-segment firms. Using plant-level data, it is found that growth and investment of conglomerate and single-segment firms is related to fundamental industry factors and individual segment-level productivity. The majority of conglomerate firms exhibit growth across industry segments that is consistent with optimal behaviour. |
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