Global Diversification, Industrial Diversification, and Firm Value

Denis, David J.; Denis, Diane K.; Yost, Keven

doi:10.1111/0022-1082.00485

Cited by 837 publications

(628 citation statements)

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“…Directors have greater freedom to pursue strategies that are not always consistent with the objective of maximizing shareholder wealth. These results are confirmed by more recent study by Denis et al (2002) on international diversification. This relationship also exists in the case where the protection of shareholders' interests is low .…”

Section: Entrenchement Behavior Manager Ownership and Diversificationsupporting

confidence: 88%

Corporate Board Characteristics, Managerial Entrenchment and Diversification Strategy: Evidence from Tunisian Context

Marouan¹

2015

IJBM

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The aim of this paper is to analyze the role of the board of directors and the management entrenchment in the explanation of diversification strategy of the Tunisian firms. In particular we focus on the characteristics of these two opposite directions bodies where the first controls the second in explaining the strategic choices of the firm. We find evidence for the negative effect of the board size and outside directors on the diversification strategy of the firm. The empirical result points also the negative effect of the CEO duality, which is inconsistent with the agency hypothesis.

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Section: Entrenchement Behavior Manager Ownership and Diversificationsupporting

confidence: 88%

Corporate Board Characteristics, Managerial Entrenchment and Diversification Strategy: Evidence from Tunisian Context

Marouan¹

2015

IJBM

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“…In other words, if the target and the acquirer belong to the same industry, operational and financial synergies are more likely to be achieved in the cross-border M&As. Many studies have confirmed that a higher abnormal return is reported for related acquisitions than non-related ones (Akbulut & Matsusaka, 2010;Denis, Denis, & Yost, 2002;Moeller & Schlingemann, 2005;Slangen, 2006).…”

Section: Industry Relatednessmentioning

confidence: 87%

The motives and performance of cross-border acquirers from emerging economies: Comparison between Chinese and Indian firms

Nicholson

Salaber

2013

International Business Review

168

155

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During the recent decade, the world has witnessed the rapid growth of MNEs from emerging economies. Their increasing participation in cross-border mergers and acquisitions has raised great attention in the extant literature. This study evaluates the value creation from these cross-border transactions from two representative emerging countries, namely China and India, and determines factors that result in the different performance of these international acquisition activities. Crossborder acquisitions conducted by these countries' companies indeed lead to significant shareholder wealth creation. Furthermore, Indian shareholders are more likely to benefit from deals in small cultural distance countries, while Chinese investors gain from the cross-border expansion of manufacturing companies. Location also affects the performance of cross-border acquisitions, with acquisitions into developed countries generating higher returns to shareholders. Our sample consists of 203 Indian and 63 Chinese cross-border deals over the period 2000-2010 and our results hold after controlling for various deal-level and firm-level characteristics.

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“…We extend the analysis by additionally including the geographic dimension of diversification (e.g., see Denis, Denis, and Yost, 2002) and testing some peculiarities associated with diversification such as the existence of "too big to fail" guarantees. We also account for the endogeneity of the diversification decision in our econometric analysis.…”

Section: Literature Reviewmentioning

confidence: 99%

Do financial conglomerates create or destroy economic value?

Schmid

Walter

2009

Journal of Financial Intermediation

211

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This paper attempts to ascertain whether or not functional diversification is valueenhancing or value-destroying in the financial services sector. Based on a U.S. dataset comprising approximately 4060 observations covering the period 1985-2004, we report a substantial and persistent conglomerate discount among financial intermediaries. Our results suggest that it is diversification that causes the discount, and not that troubled firms diversify into other more promising areas. We also investigate the geographic dimension of diversification as well as the interaction between geographic scope and functional diversification and find that the value-destruction associated with functional diversification is not apparent in geographic diversification. A further finding is that there is a significant premium for the very largest of our sample firms (with total assets above 100bn USD) indicating that there are "too big to fail" guarantees for very large financial conglomerates.

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Global Diversification, Industrial Diversification, and Firm Value

Cited by 837 publications

References 50 publications

Corporate Board Characteristics, Managerial Entrenchment and Diversification Strategy: Evidence from Tunisian Context

Corporate Board Characteristics, Managerial Entrenchment and Diversification Strategy: Evidence from Tunisian Context

The motives and performance of cross-border acquirers from emerging economies: Comparison between Chinese and Indian firms

Do financial conglomerates create or destroy economic value?

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