Der Diversification Discount in Deutschland: Existiert ein Bewertungsabschlag für diversifizierte Unternehmen?

This study analyzes the existence of the diversification discount in the German stock market. Recent examples show that the degree of diversification is an important managerial decision variable and highlight the importance of the topic for practitioners. The diversification discount was extensively studied and documented in the U.S., but there is still a huge debate in the literature over the reasons for the discount. Up to now, there is only little and contradicting evidence for Germany. One potential reason is that existing studies at least in part use segment reports from years before the year 2000, i.e. before the legal basis for segment reports was introduced. In our study, we document a significant discount between 5% and 10% for diversified firms compared to focussed firms in the period from 2000 to 2004. However, further analyses show that diversification per se is not the only reason for the discount. Furthermore, we find that the measures used in the literature to calculate the discount lead, if anything, to an overestimation of the discount.