Optimal Diversification

João Gomes and Dmitry Livdan

No 3461, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In this Paper we show that the main empirical findings about firm diversification and performance are actually consistent with the optimal behavior of a firm that maximizes shareholder value. In our model, diversification allows a firm to explore better productive opportunities while taking advantage of economies of scale. The dynamic structure of our model allows us to examine several aspects of the relationship between firm diversification and performance in a very general setting.

Keywords: Diversification discount; Size; Corporate strategy; Total factor productivity; Diversification (search for similar items in EconPapers)
JEL-codes: D21 G32 G34 (search for similar items in EconPapers)
Date: 2002-07
New Economics Papers: this item is included in nep-cfn and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://cepr.org/publications/DP3461 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:3461

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP3461

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().