Abstract

http://ssrn.com/abstract=1081645
 
 

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50+ Years of Diversification Announcements


Mehmet Akbulut


California State Univ. Fullerton

John G. Matsusaka


University of Southern California - Marshall School of Business; USC Gould School of Law

January 8, 2008

USC CLEO Research Paper No. C08-2
Marshall School of Business Working Paper No. MKT 11-08

Abstract:     
This paper studies the announcement returns from 4,764 mergers over the last 57 years in order to shed light on the causes of corporate diversification. One prominent view is that diversification is value destroying, either because of agency problems or internal investment distortions, but we find that combined (acquirer + target) announcement returns were significantly positive for diversifying mergers throughout the period, and no lower than the returns to related mergers. We find that returns to diversifying acquisitions declined after the 1970s, and that investors rewarded mergers involving financially constrained firms before but not after 1980, consistent with the view that the value of internal capital markets declined after the conglomerate merger wave.

* Earlier versions of this paper were circulated under the names Fifty Years of Diversification Announcements and The Waning of Corporate Diversification.

Number of Pages in PDF File: 49

Keywords: Diversification, Mergers, Acquisitions, Mergers and Acquisitions, Internal Capital Markets, Corporate Diversification, Corporate Governance, Corporate Control

JEL Classification: G34, G3

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Date posted: January 14, 2008 ; Last revised: November 16, 2013

Suggested Citation

Akbulut, Mehmet and Matsusaka, John G., 50+ Years of Diversification Announcements (January 8, 2008). USC CLEO Research Paper No. C08-2; Marshall School of Business Working Paper No. MKT 11-08. Available at SSRN: http://ssrn.com/abstract=1081645 or http://dx.doi.org/10.2139/ssrn.1081645

Contact Information

Mehmet E. Akbulut (Contact Author)
California State Univ. Fullerton ( email )
PO Box 34080
Fullerton, CA 92834-9480
United States
657-278-8259 (Phone)
John G. Matsusaka
University of Southern California - Marshall School of Business ( email )
Department of Finance & Business Economics
Los Angeles, CA 90089
United States
213-740-6495 (Phone)
213-740-6650 (Fax)

USC Gould School of Law
699 Exposition Boulevard
Los Angeles, CA 90089
United States
213-740-6495 (Phone)

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