Does diversification destroy value? Evidence from the industry shocks

• 成果类型: Article
• 署名作者: Lamont, OA; Polk, C
• 署名单位: University of Chicago; National Bureau of Economic Research; Northwestern University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(01)00089-7
• 发表日期: 2002
• 页码: 51-77
• 关键词: diversified firms; internal capital markets

摘要

Does corporate diversification reduce shareholder value? Since firms endogenously choose to diversify, exogenous variation in diversification is necessary to draw inferences about the causal effect. We examine changes in the within-firm dispersion of industry investment, or diversity. We find that exogenous changes in diversity, due to changes in industry investment, are negatively related to firm value. Thus diversification destroys value, consistent with the inefficient internal capital markets hypothesis. Measurement error does not cause this finding, We also find that exogenous changes in industry cash flow diversity are negatively related to firm value. (C) 2002 Elsevier Science S.A, All rights reserved.