Corporate Diversification and the Cost of Capital

• 成果类型: Article
• 署名作者: Hann, Rebecca N.; Ogneva, Maria; Ozbas, Oguzhan
• 署名单位: University System of Maryland; University of Maryland College Park; University of Southern California
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12067
• 发表日期: 2013
• 页码: 1961-1999
• 关键词: constraints; equity; INVESTMENT; earnings; returns; section; debt

摘要

We examine whether organizational form matters for a firm's cost of capital. Contrary to the conventional view, we argue that coinsurance among a firm's business units can reduce systematic risk through the avoidance of countercyclical deadweight costs. We find that diversified firms have, on average, a lower cost of capital than comparable portfolios of stand-alone firms. In addition, diversified firms with less correlated segment cash flows have a lower cost of capital, consistent with a coinsurance effect. Holding cash flows constant, our estimates imply an average value gain of approximately 5% when moving from the highest to the lowest cash flow correlation quintile.