Does Diversification Create Value in the Presence of External Financing Constraints? Evidence from the 2007-2009 Financial Crisis

• 成果类型: Article
• 署名作者: Kuppuswamy, Venkat; Villalonga, Belen
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill; New York University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2015.2165
• 发表日期: 2016
• 页码: 905-923
• 关键词: crisis; diversification; discount; Conglomerates; internal capital markets; coinsurance

摘要

We show that the value of corporate diversification increased during the 2007-2009 financial crisis. Diversification gave firms both financing and investment advantages. First, conglomerates became significantly more leveraged relative to comparable focused firms. Second, conglomerates' access to internal capital markets became more valuable, not just because external capital markets became more costly but also because the efficiency of internal capital allocation increased significantly during the crisis. Our analysis provides new evidence on how and why the value of diversification varies with financial constraints and economic conditions, and it suggests that corporate diversification can serve an important insurance function for investors.