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| Author: | Burch, T. R. Nanda, V. |
| Title: | Divisional diversity and the conglomerate discount: evidence from spinoffs |
| Journal: | Journal of Financial Economics
2003 : OCT, VOL. 70:1, p. 69-98 |
| Index terms: | Companies Diversification Capital markets Spin-offs |
| Language: | eng |
| Abstract: | The authors investigate the diversity cost hypothesis of spinoffs by using postspinoff data to (1) reconstruct the diversified firm after the spinoff and assess the aggregate improvement in value and (2) relate any value improvements to changes in diversity. They find that improvements in aggregate value depend significantly on changes in both a direct measure of diversity and measures based on industry proxies. The authors conclude that diversification discounts at least partially reflect a value loss due to the diversified nature of the firm itself, rather than selection bias or measurement error. |
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