The Conglomerate Discount in Germany and the Relationship to Corporate Governance

Abstract

This paper documents the conglomerate discount for all available German firms and the DAX 30 firms in detail. It shows a moderate discount of about 0.06 based on German comparable firms and of about 0.20 for a combined sample of German and European peer groups. I further examine the relationship between the discount and industry concentration as well as uncertainty of valuation. Finally, I document that corporate governance behavior affects the conglomerate discount.

Keywords: conglomerate discount, corporate governance

JEL Classification: G31, G32, G34