Conglomerates and Industry Distress

• 成果类型: Article
• 署名作者: Gopalan, Radhakrishnan; Xie, Kangzhen
• 署名单位: Washington University (WUSTL); University of Arkansas System; University of Arkansas Fayetteville
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhr060
• 发表日期: 2011
• 页码: 3642
• 关键词: internal capital-markets; corporate diversification; FINANCIAL RATIOS; acquisitions; constraints; COMPETITION; INVESTMENT; prediction; responses; mergers

摘要

Focusing on economic distress episodes in an industry, we estimate the effect of conglomeration on resource allocation. Distressed segments have higher sales growth, higher cash flow, and higher expenditure on research and development than single-segment firms. This is especially true for segments with high past performance, for unrated firms, and in competitive industries. Single-segment firms increase cash holding, and the diversification discount reduces during industry distress. Firms with high past performance acquire their industry counterparts, and firms with low past performance exit the distressed industry. Industries more prone to distress have greater conglomeration. Overall, conglomeration enables segments to avoid financial constraints during industry distress.