scholarly journals Explaining the Diversification Discount

2001 ◽  
Author(s):  
José Manuel Campa ◽  
Simi Kedia
Keyword(s):  
Diversification Discount

scholarly journals The Effect of SFAS No. 131 on the Diversification Discount

2015 ◽  
Vol 7 (2) ◽  
pp. 58
Author(s):  
Seoungpil Ahn
Keyword(s):  
Firm Value ◽  
Investment Efficiency ◽  
Diversification Discount ◽  
Segment Reporting ◽  
Precise Estimation ◽  
Rule Change ◽  
Before And After ◽  
Excess Value ◽  
Diversified Firms ◽  
The Impact

<p>For a sample of diversified firms, I investigate the impact of the segment reporting rule change from SFAS No. 14 to SFAS No. 131 in 1997. This change in segment-reporting rules to SFAS No. 131 potentially allows more precise estimation of diversification discount. I probe the changes in the diversification discount before and after the reporting rule change in 1997. I find that there is a substantial increase in the diversification discount under SFAS No. 131. Further analysis indicates that the changes in the diversification discount are unrelated to the changes in firm value or investment efficiency. Instead, the measures of diversity appear to be more associated with the changes in excess value. This indicates that excess value is not a clean measure of diversification discount.</p>

scholarly journals How much of the diversification discount can be explained by poor corporate governance?

2012 ◽  
Vol 103 (1) ◽  
pp. 41-60 ◽  
Author(s):  
Daniel Hoechle ◽  
Markus Schmid ◽  
Ingo Walter ◽  
David Yermack
Keyword(s):  
Corporate Governance ◽  
Diversification Discount

Corporate diversification

2018 ◽  
Vol 17 (3) ◽  
pp. 405-424 ◽  
Author(s):  
Garrett C.C. Smith ◽  
Jeffrey M. Coy
Keyword(s):  
Design Methodology ◽  
Negative Relationship ◽  
Corporate Diversification ◽  
Diversification Discount ◽  
Firm Level ◽  
Content Type ◽  
Long Run ◽  
Fundamental Value ◽  
Diversified Firms ◽  
Investor Preference

Purpose The purpose of this study is to compare two theories that relate the proportion of diversified firms in the economy and the implied discount for diversified firms: the first is a real-options model predicting a positive relationship between the discount and management’s choice to operate a diversified firm; the second is based on catering theory, in which a negative relationship is predicted, as management is attentive to investor preference concerning diversified firms. Design/methodology/approach This study proposes a new aggregate measure of the diversification discount. The authors’ measure allows for decomposition of the discount into firm-level mispricing, industry-level mispricing and long-run fundamental value components. Findings Results support a catering theory of diversification. The discount appears to be the result of firm-level mispricing. Thus, providing an explanation for why, in light of the observed discount, a large number of diversified firms persist. Originality/value To the authors’ knowledge, this is the first study to provide evidence that firm-level mispricing may drive the observed diversification discount.

Sign in / Sign up

Export Citation Format

Share Document