Value exploration and materialization in diversification strategies

Internal capital market efficiency and the diversification discount: The role of financial statement comparability

“…More diversification activities occur after 1998. These results are consistent with Ekkayokkaya and Paudyal () and Holder and Zhao (), who find that most diversification activities occurring during 1998–2000 were cases of focused firms diversifying or diversified firms increasing their diversification. However, we also find that diversification discounts occur because excess value is negative across the documented time period.…”

Are real options a missing piece in the diversification-value puzzle?

“…The reason may be ex-ante: diversified firms had poorer growth opportunities before they diversify and this strategy is the mechanism they choose for seeking fresh sources of expansion (Holder and Zhao, 2015;Hyland and Diltz, 2002;Stowe and Xing, 2006); or expost: diversification implies exercising profitable current growth options by replacing them with their underlying assets (Bernardo and Chowdhry, 2002). In the first case, it seems that corporate diversification is a kind of an inefficient (or at least sluggish) source of growth options, whereas in the second case, corporate diversification seems to immediately deplete growth options.…”

Related and unrelated product diversification and collaboration strategies: Comparison between the pharmaceutical and biopharmaceutical industries

“…Diversification into different markets should be conducted within a firm's management capability (Holder & Zhao, 2014). UPD draws attention to generating firm performance in the short run because of not only the new growth opportunities in terms of market‐to‐book ratio (Holder & Zhao, 2014), but also the advantages of risk reduction, and distribution of financial resources and investment funds (Picone & Dagnino, 2016).…”

“…Diversification into different markets should be conducted within a firm's management capability (Holder & Zhao, 2014). UPD draws attention to generating firm performance in the short run because of not only the new growth opportunities in terms of market‐to‐book ratio (Holder & Zhao, 2014), but also the advantages of risk reduction, and distribution of financial resources and investment funds (Picone & Dagnino, 2016). However, due to the difficulties to maintain efficient management and focus leadership only on the new areas, firms that adopt a UPD strategy encounter high costs such as governance and coordination costs in the intermediate term (Chen et al, 2012).…”