Does corporate diversication create value in south america? The chilean case

Christian Espinosa-Méndez, Carlos Maquieira and João paulo Vieito ()

No 38, Working Papers from Facultad de Economía y Empresa, Universidad Diego Portales

Abstract: This investigation is among the firsts to analyze the impact of corporate diversification in the firm value, controlling for shareholders ownership concentration, in companies listed in one of the most developed stock markets in America Latina – the Chile stock market. Our results describe a negative impact of corporate diversification in firm value only when the major shareholder owns more than 67% of the firm (supermajority rule in Chile).When the analyzed was performed to the three major shareholders, if they hold less than 50% of the firm stocks there is no relation between excess value and ownership concentration for diversified firms.We also conclude that when ownership is less concentratedon the main shareholders, thediversification effect does not destroy firm value.

Date: 2012-10
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