Excess value and restructurings by diversified firms |
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| Affiliation: | 1. HEC Montréal, 3000 Chemin de la Côte-Sainte-Catherine, Montréal Québec H3T 2A7, Canada;2. Université de Sherbrooke, 2500 Boulevard de l''Université, Sherbrooke Québec J1K 2R1, Canada;1. Department of Risk Management and Insurance, College of Economics, Shenzhen University, 3688 Nanhai Blvd., Nanshan District, Shenzhen 518060, Guangdong, China;2. Safeco Distinguished Professor of Insurance, Department of Finance and Management Science, Washington State University, PO Box 644746, Pullman, WA 99164-4746, USA;3. Department of Finance and Marketing, College of Business, California State University, Chico |
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| Abstract: | We examine whether restructuring decisions by diversified firms are related to their excess values. We find that changes in diversification level, measured as changes in the number of segments or number of industries, are positively and significantly associated with excess values. Further, at lower levels of excess values, firms are significantly more likely to increase focus than maintain their existing levels of diversification and, at higher levels of excess values, they are significantly more likely to diversify further than maintain or reduce their current levels of diversification. These findings indicate that excess value variations are meaningful and predict restructuring decisions. |
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| Keywords: | Diversification Conglomerates Excess value Diversification discount Restructuring |
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