The Sources Of Potential Value Creation From Business Diversification, Business Cycles, And Shareholder Value Generation

Xavier Castañer () and G. Bascle
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Xavier Castañer: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: In this paper we assess the value consequences of business diversification for shareholders in different phases of the business cycle, a controversial issue. More precisely, we investigate whether economic and financial synergies lead diversified firms to trade at a premium or discount during bull and bear periods. Contrary to Lubatkin and Chatterjee (1991), we argue that risk-driven diversifiers will exhibit lower valuation than their specialized counterparts in bull periods, whereas we hypothesize that the effect will be neutral during bear periods. We plan to test our arguments, and the hypotheses which derive from them, in a sample of US diversified and publicly traded companies in the 1996-2004 period.

Keywords: Value Creation; Business Diversification; Business Cycles; Shareholder Value Generation (search for similar items in EconPapers)
Date: 2006
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Published in 2006

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00125676

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