Diversification and heterogeneity of investor beliefs

Jie Jiao, Bin Qiu and An Yan

Journal of Banking & Finance, 2013, vol. 37, issue 9, 3435-3453

Abstract: In the paper, we find that diversification reduces the heterogeneity of investor beliefs on firm value. We obtain this finding by comparing not only between diversified and focused firms but also between diversifying and non-diversifying mergers. We also find that the reduced heterogeneity of investor beliefs on a diversified firm relative to its focused peers is negatively associated with its contemporaneous excess value and positively associated with its future excess value. Overall, our results contribute to the understanding about how corporate organization structure affects the heterogeneity of investor beliefs and further firm value.

Keywords: Diversification; Heterogeneity of investor beliefs; Excess value (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:9:p:3435-3453

DOI: 10.1016/j.jbankfin.2013.04.028

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