search query: @indexterm CONGLOMERATE COMPANIES / total: 223
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| Author: | Graham, J.R. Lemmon, M.L. Wolf, J.G. |
| Title: | Does corporate diversification destroy value? |
| Journal: | Journal of Finance
2002 : APR, VOL. 57:2, p. 695-720 |
| Index terms: | Share prices Mergers Conglomerate companies Diversification Reporting Value analysis USA |
| Language: | eng |
| Abstract: | In this paper, several hundred firms that expand via acquisition and/or increase their number of business segments are analyzed. The combined market reaction to acquisition announcements is positive, but acquiring firm excess values decline after the diversifying event. Much of the excess value reduction occurs due toe the sample firms acquiring already discounted business units, and not due to value destroyed by diversifying. This implies that the standard assumption that conglomerate divisions can be benchmarked to typical stand-alone firms should be carefully reconsidered. In addition, it is shown that excess value does not decline when firms increase their number of business segments because of pure reporting changes. |
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