Corporate Diversification and Agency

Benjamin Hermalin () and Michael L. Katz ()

Industrial Organization from EconWPA

Abstract: By a well-known argument, securities holders do not directly benefit from risk-reducing corporate diversification when they can replicate this difersification on their own. Some have argued that corporate diversification may be of value, or can otherwise be explained by, the agency relationship between securities holders and managers. We argue that the value of diversification in an agency relationship derives not from its effects on risk, but rather from its effects on the principal's information about the agent's actions.

Keywords: Agency; Corporate Diversification (search for similar items in EconPapers)
JEL-codes: L2 G32 (search for similar items in EconPapers)
Date: 1994-02-24, Revised 1996-11-15
Note: 177,985 bytes postscript file, compressed; keywords: diversification, principal-agent relationship

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Related works:
Working Paper: Corporate Diversification and Agency (2000)
Working Paper: Corporate Diversification and Agency (2000)
Working Paper: Corporate Diversification and Agency (2000)
Working Paper: Corporate Diversification and Agency (2000)
Working Paper: Corporate Diversification and Agency (1994)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:9402001

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