Corporate diversification and firm value: a survey of recent literature

Erdorf, Stefan; Hartmann-Wendels, Thomas; Heinrichs, Nicolas; Matz, Michael E.

doi:10.1007/s11408-013-0209-6

Cited by 50 publications

(16 citation statements)

References 118 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…We also use a set of dummy variables to control for intrastate acquisitions (Goergen and Renneboog, 2004; Moeller and Schlingemann, 2005), focused deals (i.e. bidder and target share the same 2-digit SIC code) (Akbulut and Matsusaka, 2010; Erdorf et al , 2013), listed targets (Arikan and Stulz, 2016; Brander and Egan, 2017; Netter et al , 2011) and cash-only deals (Fuller et al , 2002; Shleifer and Vishny, 2003; Travlos, 1987). Table 1 presents the summary statistics of all the above variables.…”

Section: Data and Empirical Methodsmentioning

confidence: 99%

The effect of ESG on value creation from mergers and acquisitions. What changed during the COVID-19 pandemic?

Tampakoudis

Noulas

Kiosses

et al. 2021

View full text Add to dashboard Cite

Purpose The purpose of this study is to investigate the relationship between environmental, social and governance (ESG) performance and shareholder wealth in the context of mergers and acquisitions (M&As) before and during the coronavirus (COVID-19) pandemic. Design/methodology/approach This paper uses a sample of 889 completed M&As announced by US firms between 1 January 2018 and 31 July 2020. Announcement abnormal returns are estimated using an event study methodology and the relation of ESG performance to shareholder value creation is tested with univariate and multivariate cross-sectional regressions. Findings This study provides evidence for a significant negative value effect of ESG performance for the shareholders of acquiring firms during the entire sample period. The negative effect appears to be stronger, as the onset of the COVID-19 crisis. This suggests that, during the pandemic-driven economic turmoil, the costs of sustainability activities outweigh any possible gains, providing evidence in support of the overinvestment hypothesis. Research limitations/implications The results of the study have important implications for firms, investors and policymakers. Firms should be more cautious with regard to extensive investments in ESG activities, particularly during economic turmoil. For shareholders, the results suggest that ESG engagement is not a resilience factor in an exogenous shock such as the COVID-19 pandemic. In terms of policymaking, the sustainability disclosure framework should remain voluntary allowing firms to report material ESG-related issues. The main limitation of the study is related to data availability regarding ESG performance. Originality/value To the best of the knowledge, this is the first study that investigates the effect of ESG performance on shareholder value in the market for corporate control before and during the COVID-19 pandemic.

show abstract

Section: Data and Empirical Methodsmentioning

confidence: 99%

The effect of ESG on value creation from mergers and acquisitions. What changed during the COVID-19 pandemic?

Tampakoudis

Noulas

Kiosses

et al. 2021

View full text Add to dashboard Cite

show abstract

“…Accordingly, diversification strategy has some benefits, such as creating synergy, market power (Montgomery 1994;Purkayastha et al 2012), risk reduction (Martin and Sayrak 2003;Purkayastha et al 2012), and internal capital market efficiency (Erdorf et al 2013;Martin and Sayrak 2003;Purkayastha et al 2012). On the other side, diversification also has several costs that emerge due to the asymmetry information (Berger and Ofek 1995;Chen and Yu 2012;Martin and Sayrak 2003), coordination (Chen and Yu 2012) and agency problems (Ataullah et al 2014;Martin and Sayrak 2003;Su and Tsang 2015) which lead to internal coordination cost (Su and Tsang 2015).…”

Section: Introductionmentioning

confidence: 99%

Diversification and corporate social performance in manufacturing companies

Patrisia

Dastgir

2016

Eurasian Bus Rev

View full text Add to dashboard Cite

The effects of diversification on financial performance are well-established, less so the way in which diversification influences company behaviour towards stakeholder demand and social concern. This paper investigates the relationship between business diversification and corporate social performance (CSP) in an industrial setting, in Indonesia. CSP is measured with an index constructed from content and disclosure analysis of annual company reports in line with global reporting initiative standards. A sample of 107 listed manufacturing companies from the Indonesian Stock Exchange is used to estimate a lagged multiple regression model to show that industry-level diversification does not have an effect on CSP. However, distinguishing between related and unrelated diversification produces a different outcome whereby, related diversification is negatively and statistically significantly correlated with CSP. Unrelated diversification, on the other hand, shows a positive and statistically significant relationship. It means the relationship between unrelated diversification and CSP is more positive than the relationship between related diversification and CSP. The findings offer a unique insight into industrial diversification and CSP in Indonesia's expanding manufacturing sector.

show abstract

“…However, several studies cast doubt on the diversification discount, which asserts that diversification strategies are value destructive (Berger & Ofek, 1995;Hoechle, Schmid, Walter, & Yermack, 2012;Kim & Mathur, 2008). On the other hand, recent literature concludes that corporate diversification alone does not drive the discount or premium, and obviously the effect is heterogeneous across certain industry settings, economic conditions, and governance structures (Erdorf, Hartmann-Wendels, Heinrichs, & Matz, 2013).…”

Section: Introductionmentioning

confidence: 99%

Financial Hegemony, Diversification Strategies and the Firm Value of Top 30 FTSE Companies in Malaysia

Yusoff¹,

Salleh²,

Ahmad³

et al. 2016

ASS

View full text Add to dashboard Cite

This study investigates the relationships between financial hegemony groups, global diversification strategies and firm value of the Malaysia's 30 largest companies listed in FTSE Bursa Malaysia Index Series during 2009 to 2012 period. We chose Malaysia as an ideal setting because the findings contribute to the phenomenon of the diversification-performance relationship in the Southeast Asian countries. We apply hegemony stability theory to explain the importance of financial hegemony groups in deciding international locations for operations. By using panel data analysis, we find that financial hegemony groups are significantly important in international location decisions. Results reveal that the stability of financial hegemony in BRICS and G7 groups enhances the financial value of the Malaysia's 30 largest companies, whereas the stability of financial hegemony in ASEAN groups is able to enhance the non-financial value of the firms. Overall, this paper suggests that in order to diversify globally, it is necessarily for the manager in the guest country to evaluate and fully understand the host country's geopolitical situation and its financial stability.

show abstract

Corporate diversification and firm value: a survey of recent literature

Cited by 50 publications

References 118 publications

The effect of ESG on value creation from mergers and acquisitions. What changed during the COVID-19 pandemic?

The effect of ESG on value creation from mergers and acquisitions. What changed during the COVID-19 pandemic?

Diversification and corporate social performance in manufacturing companies

Financial Hegemony, Diversification Strategies and the Firm Value of Top 30 FTSE Companies in Malaysia

Contact Info

Product

Resources

About