Diversification and heterogeneity of investor beliefs |
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Authors: | Jie Jiao Bin Qiu An Yan |
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Institution: | 1. School of Economics and Management, Tsinghua University, Beijing, China;2. School of Economics and Management, Southeast University, Nanjing, China;3. Schools of Business Administration, Fordham University, 113 West 60th Street, New York, NY 10023, United States |
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Abstract: | In the paper, we find that diversification reduces the heterogeneity of investor beliefs on firm value. We obtain this finding by comparing not only between diversified and focused firms but also between diversifying and non-diversifying mergers. We also find that the reduced heterogeneity of investor beliefs on a diversified firm relative to its focused peers is negatively associated with its contemporaneous excess value and positively associated with its future excess value. Overall, our results contribute to the understanding about how corporate organization structure affects the heterogeneity of investor beliefs and further firm value. |
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Keywords: | G32 G34 |
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