Corporate diversification and stock risk: Evidence from a global shock

Enrico Onali and Danilo V. Mascia

Journal of Corporate Finance, 2022, vol. 72, issue C

Abstract: We investigate the impact of corporate diversification on stock risk. For identification, we exploit an exogenous shock on volatility expectations related to COVID-19 lockdowns resulting in a period of high volatility. We show that firms that diversify only internationally experience a lower post-shock increase in daily volatility. However, diversifying only by business segment leads to a higher increase in post-shock daily volatility. Our main results are robust to different proxies for international and business diversification and daily volatility. Overall, these findings provide a more nuanced picture of the potential impact of corporate diversification on stock risk.

Keywords: Volatility; Stock risk; Pandemic; Diversification (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:72:y:2022:i:c:s0929119921002728

DOI: 10.1016/j.jcorpfin.2021.102150

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