Because corporate diversification and organization co-evolve, diversification discounts, which are widely reported in the literature, can be caused by organizational structure, rather than by the industrial scope of the firm. The paper examines this possibility based on a large sample of Japanese firms for which the legal (parent-subsidiary) structure of the organization is easily observable. I...

We examine if shareholders' attitude towards firm diversification strategy is revealed in their votes on management-initiated acquisition and divestment proposals using data voting by shareholders of UK public firms between 1997 2019. find that dissent higher for diversifying acquisitions lower refocusing divestments, especially when these involve diversified firms. also a negative relationship...

Using plant-level observations from the Longitudinal Research Database I show that conglomerates are more productive than stand-alone firms at a given point in time. Dynamically, however, firms that diversify experience a net reduction in productivity. While the acquired plants increase productivity, incumbent plants suffer. Moreover, stock prices track firm productivity and this tracking is eq...

This paper offers a market microstructure based model to explain the well-documented diversification discount. While explicitly assuming that stock price conveys valuable information to the management, our model shows that the value loss from diversification is a function of the stock price informativeness. If more investors are willing to follow and actively trade a certain stock, more informa...

We characterize dependence and tail dependence in corporate credit using a new class of dynamic copula models which can capture dynamic dependence and asymmetry in large samples of firms. We also document important differences between the dependence dynamics for credit spreads and equity returns. Modeling a decade of weekly CDS spreads for 215 firms, we find that copula correlations are highly ...

Corporate diversification is widely believed to be inefficient. It runs against one of the oldest ideas in economics, that specialization is productive. A popular explanation for its prevalence is that firms are plagued with agency problems that allow managers to enter new businesses (from which they privately benefit) at the expense of shareholders. However, the empirical evidence suggests tha...