Corporate Structure and Equity Offerings: Are There Benefits to Diversification?

Charles J Hadlock, Michael Ryngaert and Shawn Thomas ()

The Journal of Business, 2001, vol. 74, issue 4, 613-35

Abstract: We examine the effect of corporate diversification on the equity-issue process in a sample of 641 equity issues from 1983 to 1994. We find that issues by diversified firms are viewed less negatively by the market than are issues by focused firms. This finding supports the hypothesis that diversification helps alleviate asymmetric information problems. Our results appear inconsistent with the hypothesis that reduced transparency exacerbates asymmetric information problems for diversified firms. The results also appear inconsistent with the hypothesis that the market anticipates that the funds raised from equity issues by diversified firms will be invested in particularly poor projects. Copyright 2001 by University of Chicago Press.

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (50)

Downloads: (external link)
http://links.jstor.org/sici?sici=0021-9398%2820011 ... O%3B2-6&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

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:ucp:jnlbus:v:74:y:2001:i:4:p:613-35

Access Statistics for this article

More articles in The Journal of Business from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().