Does Corporate Diversification Reduce Firm Risk? Evidence from Diversifying Acquisitions
AbstractThe main purpose of this paper is to investigate empirically whether corporate diversification reduces the risk of the diversifying firm. We investigate this issue using a sample of diversifying acquisitions and various risk measures. We find that corporate diversification tends to decrease the risk of some firms but increase the risk of many others. On average corporate diversification does not lower firm risk. These findings call into question the notion that corporate diversification strictly reduces firm risk.
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Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal Review of Pacific Basin Financial Markets and Policies.
Volume (Year): 14 (2011)
Issue (Month): 03 ()
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Web page: http://www.worldscientific.com/worldscinet/rpbfmp
Find related papers by JEL classification:
- G1 - Financial Economics - - General Financial Markets
- G2 - Financial Economics - - Financial Institutions and Services
- G3 - Financial Economics - - Corporate Finance and Governance
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