The Value of Diversification During the Conglomerate Merger Wave
1996; Wiley; Volume: 51; Issue: 4 Linguagem: Inglês
10.2307/2329392
ISSN1540-6261
Autores Tópico(s)Corporate Finance and Governance
ResumoThe Journal of FinanceVolume 51, Issue 4 p. 1201-1225 Article The Value of Diversification During the Conglomerate Merger Wave HENRI SERVAES, HENRI SERVAES University of North Carolina at Chapel Hill. Part of this research was completed while the author was visiting the Graduate School of Business at the University of Chicago. I would like to thank Michael Barclay, David Denis, Ajay Khorana, John Matsusaka, Eli Ofek, Tim Opler, David Ravenscraft, René Stulz, Sigrid Vandemaele, Sunil Wahal, Marc Zenner, and seminar participants at the University of North Carolina at Chapel Hill, Tilburg University, and the NBER Summer Institute for helpful comments. Carl Ackermann, Amy Dittmar, Ajay Khorana, and Prakit Narongtanupon have provided excellent research assistance.Search for more papers by this author HENRI SERVAES, HENRI SERVAES University of North Carolina at Chapel Hill. Part of this research was completed while the author was visiting the Graduate School of Business at the University of Chicago. I would like to thank Michael Barclay, David Denis, Ajay Khorana, John Matsusaka, Eli Ofek, Tim Opler, David Ravenscraft, René Stulz, Sigrid Vandemaele, Sunil Wahal, Marc Zenner, and seminar participants at the University of North Carolina at Chapel Hill, Tilburg University, and the NBER Summer Institute for helpful comments. Carl Ackermann, Amy Dittmar, Ajay Khorana, and Prakit Narongtanupon have provided excellent research assistance.Search for more papers by this author First published: September 1996 https://doi.org/10.1111/j.1540-6261.1996.tb04067.xCitations: 445 Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onEmailFacebookTwitterLinkedInRedditWechat ABSTRACT The current trend toward corporate focus reverses the diversification trend of the late 1960s and early 1970s. This article examines the value of diversification when many corporations started to diversify. I find no evidence that diversified companies were valued at a premium over single segment firms during the 1960s and 1970s. On the contrary, there was a large diversification discount during the 1960s, but this discount declined to zero during the 1970s. Insider ownership was negatively related to diversification during the 1960s, but when the diversification discount declined, firms with high insider ownership were the first to diversify. REFERENCES Amihud, Yakov, and Baruch Lev, 1981, Risk reduction as a managerial motive for conglomerate mergers, The Bell Journal of Economics 12, 605–617. Berger, Philip, and Eli Ofek, 1995, Diversification's effect on firm value, Journal of Financial Economics 37, 39–65. Bhagat, Sanjai, Andrei Shleifer, and Robert W. Vishny, 1990, Hostile takeovers in the 1980s: The return to corporate specialization, Brookings Papers on Economic Activity: Microeconomics, 1–72. Bhide, Amir, 1990, Reversing corporate diversification, 1990, Journal of Applied Corporate Finance 3, 70–81. Comment, Robert, and Gregg A. Jarrell, 1995, Corporate focus and stock returns, Journal of Financial Economics 37, 67–87. Donaldson, Gordon, 1990, Voluntary restructuring: The case of General Mills, Journal of Financial Economics 27, 117–141. Denis, David J., Diane K. Denis, and Atulya Sarin, 1995, Agency problems, equity ownership, and corporate diversification, Working paper, Purdue University. Gertner, Robert H., David S. Scharfstein, and Jeremy C. Stein, 1994, Internal versus external capital markets, Quarterly Journal of Economics 109, 1211–1230. Hall, B., C. Cummins, E. Laderman, and J. Mundy, 1988, The R&D master file documentation, National Bureau of Economic Research, Boston, MA. Jensen, Michael C., 1986, Agency costs of free cash flow, corporate finance and takeovers, American Economic Review 76, 323–329. Kaplan, Steven N., and Michael S. Weisbach, 1992, The success of acquisitions: Evidence from divestitures, Journal of Finance 47, 107–138. Lang, Larry H. P., and Rene M. Stulz, 1994, Tobin's q, corporate diversification and firm performance, Journal of Political Economy 102, 1248–1280. Lewellen, Wilbur G., 1971, A pure financial rationale for the conglomerate merger, Journal of Finance 26, 521–537. Lichtenberg, Frank R., 1992, Industrial de-diversification and its consequences for productivity, Journal of Economic Behavior and Organization 18, 427–438. Liebeskind, Julia, and Tim C. Opler, 1992, The causes of corporate refocusing, Working paper, University of Southern California and Southern Methodist University. Lindenberg, Eric, and Stephen Ross, 1981, Tobin's q and industrial organization, Journal of Business 54, 1–32. Matsusaka, John G., 1993, Takeover motives during the conglomerate merger wave, Rand Journal of Economics 24, 357–379. Matsusaka, John G., and Vikram Nanda, 1994, A theory of the diversified firm, refocusing, and divestiture, Working paper, Stanford University and University of Southern California. McCutcheon, Barbara, 1995, Evidence on internal capital markets as a source of gains in conglomerate mergers, Working paper, University of Iowa. Meyer, M., P. Milgrom, and J. Roberts, 1992, Organizational prospects, influence costs, and ownership changes, Journal of Economics and Management Strategy 1, 9–35. Morck, Randall, Andrei Shleifer, and Robert W. Vishny, 1988, Management ownership and market valuation: An empirical analysis, Journal of Financial Economics 20, 293–316. Morck, Randall, Andrei Shleifer, and Robert W. Vishny, 1990, Do managerial objectives drive bad acquisitions?, Journal of Finance 45, 31–48. Myers, Stewart, and Nicholas Majluf, 1984, Corporate financing and investment decisions when firms have information that investors do not have, Journal of Financial Economics 13, 187–221. Palepu, Krishna, 1985, Diversification strategy, profit performance and the entropy measure, Strategic Management Journal 6, 239–255. Perfect, Steven B., and Kenneth Wiles, 1994, Alternative constructions of Tobin's q: An empirical comparison, Journal of Empirical Finance 1, 313–341. Ravenscraft, David J., and F. M. Scherer, 1987, Mergers, sell-offs & economic efficiency, The Brookings Institution, Washington, D.C. Rumelt, Richard P., 1974, Strategy, Structure, and Economic Performance, (Division of Research Graduate School of Business Administration, Harvard University, Boston). Schipper, Katherine, and Rex Thompson, 1983, Evidence on the capitalized value of merger activity for acquiring firms, Journal of Financial Economics 11, 85–119. Shleifer, Andrei, and Robert W. Vishny, 1989, Management entrenchment: The case of manager-specific investments, Journal of Financial Economics 25, 123–140. Shleifer, Andrei, and Robert W. Vishny, 1992, Liquidation values and debt capacity: A market equilibrium approach, Journal of Finance 45, 379–396. Stulz, René M., 1990, Managerial discretion and optimal financing policies, Journal of Financial Economics 26, 3–27. Teece, David J., 1980, Economies of scope and the scope of the enterprise, Journal of Economic Behavior and Organization 1, 223–247. Wernerfelt, Birger, and Cynthia A. Montgomery, 1988, Tobin's q and the importance of focus in firm performance, American Economic Review 78, 246–250. Weston, J. Fred, and Surenda K. Mansinghka, 1971, Tests of the efficiency performance of conglomerate firms, Journal of Finance 26, 919–936. Williamson, Oliver E., 1970, Corporate Control and Business Behavior: An Inquiry into the Effects of Organizational Form on Enterprise Behavior (Prentice Hall, Englewood Cliffs, N.J.). Citing Literature Volume51, Issue4September 1996Pages 1201-1225 ReferencesRelatedInformation
Referência(s)