The Cost of Diversity : The Diversification Discount And Inefficient Investment  

Oleh:

Rajan, Raghuram G. ; Zingales, Luigi ; Servaes, Henri

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 55 no. 1 (2000), page 35-80.
Topik: diversity; diversified companies; capital budgeting; asset allocation; hypotheses; mathematical models; studies
Fulltext: p 35.pdf (384.74KB)

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88.1 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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We model the distortions that internal power struggles can generate in the allocation of resources between divisions of a diversified firm. The model predicts that if divisions are similar in the level of their resources and opportunities, funds will be transffered from divisions with poor opportunities to divisions with good opportunities. When diversity in resources and opportunities increases, however, resources can flow toward the most inefficient division, leading to more inefficient investment and less valuable firms. We test these predictions on a panel of diversified U. S. firms during the period of 1980 to 1993 and find evidence consistent with them.

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