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Corporate Diversification: Good for Some Bad for Others

  • Felipe Balmaceda

    ()

In this paper a model based on conflicts of interest between shareholders, the CEO and divisional managers is developed to explain why corporate diversification is good for some firms and bad for others. It is shown that when the decision to diversify is endogenous, whether diversification destroys value depends on the severity of con‡icts of interests and the complementarities across divisions and not, as usual in the literature that explains value-decreasing diversification, on the efficiency of internal capital markets.

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File URL: http://www.dii.uchile.cl/~cea/sitedev/cea/www/download.php?file=documentos_trabajo/ASOCFILE120030326144345.pdf
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Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 141.

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Date of creation: 2002
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Handle: RePEc:edj:ceauch:141
Contact details of provider: Web page: http://www.dii.uchile.cl/cea/
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