Download or read book The Performance of Diversifying Firms Revisited written by Juan Otero Serrano and published by . This book was released on 2008 with total page 278 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Effect of Diversification on Performance Revisited written by Juan Santaló and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we argue conceptually and show empirically that the effect of diversification on performance is not homogeneous across industries, as previously assumed in the literature on diversification in strategy and finance. Some industries may be more friendly environments for diversified firms than for specialists, or vice versa. After replicating the main findings in finance and strategy, we show that the number of specialists in an industry is an important moderator of the diversification-performance relationship, which determines the existence of a diversification discount, a premium, or the curvilinear relationship frequently found in strategy research. The results are robust to the use of different specifications and control for the self-selection problem detected by recent research on the diversification discount.
Download or read book Revisiting Diversification and Performance Relationship written by Weichu Xu and published by . This book was released on 2016 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: The diversification-performance relationship has been the hot subject of extensive studies for past 30 years. But the studies about the product diversification and performance relationship produced mixed results. In this paper, we integrate the transaction cost theory with the resource-based view together to explain this relationship for the firms from developed countries in past 15 years. Using cross-sectional time-series regression model to analyze a sample of 19,890 firm-years data from firms in Europe, US and Japan during the period from 1991 and 2004, we found that product diversification is negatively related to firm's performance. The result also shows that different industries and different countries have no statistically significant effects on this relationship but some years have effects on this relationship.
Download or read book Why Do Managers Diversify Their Firms Agency Reconsidered written by Rajesh K. Aggarwal and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a contracting model between shareholders and managers in which managers diversify their firms for two reasons: to reduce idiosyncratic risk and to capture private benefits. We test the comparative static predictions of our model. In contrast to previous work, we find that diversification is positively related to managerial incentives. Further, the link between firm performance and managerial incentives is weaker for firms that experience changes in diversification than it is for firms that do not. Our findings suggest that managers diversify their firms in response to changes in private benefits rather than to reduce their exposure to risk.
Download or read book Why Firms Diversify written by David C. Hyland and published by . This book was released on 2000 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is substantial evidence that the market placed a lower value on diversified than specialized firms during the 1980's (Lang and Stulz (1994) and Berger and Ofek (1995)). However, many firms diversified anyway. This paper addresses the question, quot;Why do firms diversify in the first place?quot; I use the Compustat segment tapes to investigate firms which are specialized and then become diversified. I find that not all segment changes represent economic events. I test the hypothesis that firms diversify due to agency costs between managers and shareholders. Looking at managerial ownership I do not find evidence of agency costs but it is possible that managerial ownership is not a good indicator of agency costs. I test the hypothesis that diversifying firms may be primarily in low growth industries and reject this hypothesis. I find evidence that diversifying firms have slightly worse financial performance than their specialized counterparts. They have free cash available to diversify or more likely have built up their cash balance to make an acquisition. The most significant explanation I find for firm diversification is that diversifying firms have not engaged in as much research and development as their non-diversifying counterparts. In order to grow or perhaps even maintain their current status, they must buy growth in areas outside of their current operations.
Download or read book Purposive Diversification and Economic Performance written by John T. Scott and published by Cambridge University Press. This book was released on 1993-06-25 with total page 284 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book examines product-line diversification of large manufacturing firms. It introduces and applies methodology that discerns groups of manufacturing industries related by complementarities in production, marketing, distribution, and research and development activities. Manufacturing firms intentionally vary production to exploit these complementarities, and Professor Scott uses evidence from U.S. manaufacturing to explore hypotheses about such purposive diversification and ensuing economic performance, including product diversification's effects on both static efficiency and the optimality of R&D investment. This study yields new perspectives on the policy debate about cooperation versus competition among firms: will industrial performance be better if leading firms cooperate on research, production, and marketing? Professor Scott shows that the answers depend on circumstances that vary with different industrial environments. His analysis offers insights about business strategy and public policy toward business combinations in conglomerate, vertical, and horizontal mergers and in cooperative R&D ventures.
Download or read book Explaining the Pattern in Returns for Diversified Firms written by Dmitry Livdan and published by . This book was released on 2008 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: Why do returns fall when firms diversify? In this paper, I show that this and other stylized facts about the performance of diversified firms are fully consistent with optimal firm behavior. In my model, corporate diversification is driven by economies of scale, synergies and better production opportunities in other industries. By dynamically linking valuation and performance, the model suggests that diversifying firms tend to be those that have experienced persistent declines in performance and, as a consequence, their returns have been falling. However, in the model, a portfolio of diversified firms earns, as in the data, the same expected return as the well-diversified portfolio of specialized firms since both portfolios have the same exposure to the aggregate risk. Finally, the model also implies that expected returns on diversified firms vary systematically with relative value, as documented by Lamont and Polk (2001).
Download or read book Impact of Diversification on Firms Performance written by Athar Iqbal and published by . This book was released on 2014 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: The data was collected through secondary research and Stock Exchanges sites were the source of information to collect the data of the companies. Total 40 companies were selected on the basis of Specialization Ratio (SR). Companies whose information were available and remained in the same category for the entire 5 years (2005-2009) were included in sample. The results of this study showed that there is no positive relationship between diversification and firms' performance. All firms are performing equally whether they are highly diversified firms, moderately diversified firms or less diversified firms with respect to their return and risk dimensions.
Download or read book Persistence of Outstanding Performance and Shareholder Value Among Diversified Firms written by Federico Marinelli and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The research domain that attempts to study the relationship between diversification and performance has not yet reached definitive and interpretable findings, and recent studies challenge the existence of a "diversification discount" and explain it partially by a data artifact. None of these studies centred their research on the question: does there exist a specific performance pattern among diversified firms? This research aims to identify persistence in performance heterogeneity by measuring the shareholder value creation of diversified firms using alternative indicators other than the excess value methodology. It also aims to measure the impact on the performance according to the degree of efficiency of the internal capital market and the degree of relatedness among business segments. A sample of 164 diversified firms with turnover higher than 1$ billion during the period 1999-2006 is examined. Because of the presence of the firm's specific effect and the length of the time series, the persistence performance is tested through the instrumental variables (IV) system generalized method of moments (GMM) dynamic panel data and the persistence of shareholder value creation and destruction is estimated according to different estimators from top tercile and lower tercile portfolios of diversified firms. Some diversified firms persistently create value as well as beat the market index while others persistently underperform. Finally, if the efficiency of the internal capital market gives certain explanatory power of the performance pattern, but limited compared to the past performance, important insights might be drawn from the findings that diversified firms with segments in many unrelated industries perform better than others in few industries or with a high number of segments; hence the inverted-U curvilinear relationship between diversification and performance is here not confirmed.
Download or read book Corporate Diversification written by Garrett C.C. Smith and published by . This book was released on 2015 with total page 145 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate diversification is a core topic in Financial Economics. The desire to better understand why a firm elects to diversify as opposed to increase in scale is the motivation of this dissertation. To accomplish this goal I test a number of dynamic models of corporate diversification, with similar predictions, to better understand the dynamic choice to diversify. I find that several previously untested models do indeed provide insight as to why a firm would diversify (Essay One). In particular two firm traits, firm talent which I use the proxy of organization capital and asset specificity which I use the proxy of asset tangibility, are strongly related to propensity of the firm to engage in corporate diversification for the first time. I also investigate changes in firm characteristics for a ten year period (five years before and after the event). I find that a firm changes substantially across many dimensions during the process of corporate diversification. vi Many of these changes are in characteristics which are known to be related to firm returns in the cross-section. Motivated in part by these findings I investigate the long-run return impact of corporate diversification on firm returns after adjusting for the difference in firm characteristics. I find that after better controlling for differences in firm characteristics 1) diversifying firms do not underperform non-event firms, 2) firms engaging in diversifying mergers do not underperform firms engaging in horizontal mergers, 3) firms engaging in organic diversification do not outperform those firms diversifying through a merger (Essay Two).
Download or read book The Post Announcement Performance of Diversifying Firms written by David C. Hyland and published by . This book was released on 2001 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We apply the Fama-French three factor model to returns from a sample of specialized firms that announced an economic diversifying event over the period from 1978 through 1992. In addition to full-sample results, we report results for sub-samples of firms that refocus within 60 months of the diversification announcement, as well as for firms that were acquired, and firms that experienced financial distress. Finally, we compare long-run monthly post-announcement returns to pre-announcement returns. We find mixed evidence, with positive immediate impacts and only weak indications of negative long-run consequences.
Download or read book Diversification Strategies and Firm Performance written by Enrico Santarelli and published by . This book was released on 2013 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is based upon the assumption that firm profitability is determined by its degree of diversification which in turn is strongly related to the antecedent decision to carry out diversification activities. This calls for an empirical approach that permits the joint analysis of the three interrelated and consecutive stages of the overall diversification process: diversification decision, degree of diversification, and outcome of diversification. We apply parametric and semiparametric approaches to control for sample selection and endogeneity of diversification decision in both static and dynamic models. After controlling for industry fixed-effects, empirical evidence from firm-level data shows that diversification has a curvilinear effect on profitability: it improves firms' profit up to a point, after which a further increase in diversification is associated with declining performance. This implies that firms should consider optimal levels of product diversification when they expand product offerings beyond their core business. Other worth-noting findings include: (i) factors stimulating firms to diversify do not necessarily encourage them to extend their diversification strategy; (ii) firms which are endowed with highly skilled human capital are likely to successfully exploit diversification as an engine of growth; (iii) while industry performance does not influence profitability of firms, it impacts their diversification decision and degree.
Download or read book The Impact of the Combined Diversification and Growth Dimensions on Firm Performance of Large Diversified Firms written by Paul G. Simmonds and published by . This book was released on 1987 with total page 304 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Research in the Sociology of Organizations Professional service firms written by Michael Lounsbury and published by . This book was released on 1988 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Asia Pacific Contemporary Finance and Development written by William A. Barnett and published by Emerald Group Publishing. This book was released on 2019-06-19 with total page 288 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume of The International Symposia in Economic Theory and Econometrics explores and investigates contemporary challenges and issues facing the Asia-Pacific economies. For researchers and students of economics and finance, this volume is a fascinating exploration of emerging topics in one the fastest growing economies in the world.
Download or read book Why firms diversify written by Randall Morck and published by . This book was released on 1998 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Diversification Refocusing and Economic Performance written by Constantinos Markides and published by MIT Press. This book was released on 1995 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work examines the causes and consequences of the "refocusing" phenomenon, where companies have stopped diversifying and begun focusing once more on their core product lines. Coverage includes a discussion of the effects of refocusing on market value, profitability and organizational structure.
