Strategic cost of diversification

• 成果类型: Article
• 署名作者: Lyandres, Evgeny
• 署名单位: Rice University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhm047
• 发表日期: 2007
• 页码: 1901
• 关键词: internal capital-markets; corporate diversification; Financial structure; oligopoly; equilibrium; collusion; mergers; FIRMS; RISK

摘要

This article proposes a new explanation for the large cross-sectional variation in the excess values of diversified firms. The model applies the idea of shareholders limited liability affecting firms output market strategies to the analysis of financial and operating choices of conglomerates. The inability of conglomerates to commit to unconstrained optimal operating strategies, following from the lack of flexibility in choosing their divisions capital structures, reduces their value. Thus, the model highlights a new type of inefficiency of the conglomerate organizational structure, which is suboptimal financing. The predictions of the model are generally supported by the data.