 Is more less? Propensity to diversify via M&A and market reactionsAbigail Hornstein and Zachary Nguyen International Review of Financial Analysis, 2014, vol. 34, issue C, 76-88 Abstract: Mergers and acquisitions (M&As) could lead to a firm diversifying into new industries, and the impact of this may be related to the firm's prior diversification. Using a panel of 1030 M&A transactions from 2000 to 2010, we find that previously diversified firms are more likely to pursue industrially diversifying M&As. Both previous and contemporary diversification measures are not associated with the firm's cumulative abnormal returns (CARs) at time of announcement but have a lasting effect on various performance measures up to two years later. We find evidence supporting both a diversification discount and premium, which can be predicted by the sign of the CAR at the time of announcement. This suggests that while diversification is necessary to explain firm value, it is not sufficient. Keywords: M&A; Diversification; Event study; Operating performance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:34:y:2014:i:c:p:76-88 DOI: 10.1016/j.irfa.2014.05.014 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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