Puzzle of Corporate Diversification Efficiency in Bric Countries

Svetlana Grigorieva () and Georgii Gorbatov ()
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Georgii Gorbatov: National Research University Higher School of Economics

HSE Working papers from National Research University Higher School of Economics

Abstract: Researchers have long tried to define the impact of corporate diversification on firm value. Academic papers mainly concentrate on the effects of corporate diversification in mature markets while its consequences in emerging capital markets are less explored. This article presents the results of an empirical analysis of corporate diversification strategies of a sample of companies from BRIC countries that expanded via acquisitions during 2000–2013. We contribute to the existing literature by examining the effects of corporate diversification on firm value during the pre- and post-crisis periods. In line with other studies, we distinguish between related and unrelated diversification and in contrast to them we single out and separately analyze horizontal, conglomerate and vertical acquisitions. Based on a sample of 319 deals initiated by companies from BRIC countries, we found positive (3.32% and 9.01%) and statistically significant cumulative abnormal returns for conglomerate acquisitions during the pre- and post-crisis periods, correspondingly. We also found that the market reacts positively and statistically significant to the announcements of horizontal and vertical integration only during the pre-crisis period.

Keywords: corporate diversification; firm value; conglomerate acquisitions; vertical integration; emerging capital markets (search for similar items in EconPapers)
JEL-codes: G14 G34 L25 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2015
New Economics Papers: this item is included in nep-cfn and nep-cis
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Published in WP BRP Series: Financial Economics / FE, September 2015, pages - 21

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