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Tekijä:Brusco, S.
Panunzi, F.
Otsikko:Reallocation of corporate resources and managerial incentives in internal capital markets
Lehti:European Economic Review
2005 : APR, VOL. 49:3, p. 659-681
Asiasana:Capital markets
Conglomerate companies
Incentives
Managers
Models
Kieli:eng
Tiivistelmä:Diversified firms often trade at a discount with respect to their focused counterparts. This paper shows that diversification can destroy value even when resources are efficiently allocated ex-post. When managers derive utility from the funds under their purview, moving funds across divisions may diminish their incentives. The ex-ante reduction in managerial incentives can more than offset the increase in firm value due to the ex-post efficient reallocation of funds. This effect is robust to the introduction of monetary incentives. Moreover, it is shown that asymmetries in size and growth prospects increase the diversification discount.
SCIMA tietueen numero: 256773
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