Publication type: Article in scientific journal
Type of review: Peer review (publication)
Title: How much of the diversification discount can be explained by poor corporate governance?
Authors: Höchle, Daniel
Schmid, Markus
Walter, Ingo
Yermack, David
DOI: 10.1016/j.jfineco.2011.03.025
Published in: Journal of Financial Economics
Volume(Issue): 103
Issue: 1
Pages: 41
Pages to: 60
Issue Date: 2012
Publisher / Ed. Institution: Elsevier
ISSN: 0304-405X
Language: German
Subjects: Organizational structure; Diversification; Firm valuation; Corporate governance
Subject (DDC): 658.1: Organization and finance
Abstract: We investigate whether the diversification discount occurs partly as an artifact of poor corporate governance. In panel data models, we find that the discount narrows by 16% to 21% when we add governance variables as regression controls. We also estimate Heckman selection models that account for the endogeneity of diversification and dynamic panel generalized method of moments models that account for the endogeneity of both diversification and governance. We find that the diversification discount persists even with these controls for endogeneity. However, in selection models the discount disappears entirely when we introduce governance variables in the second stage, and in dynamic panel GMM models the discount narrows by 37% when we include governance variables.
URI: https://digitalcollection.zhaw.ch/handle/11475/9087
Fulltext version: Published version
License (according to publishing contract): Licence according to publishing contract
Departement: School of Management and Law
Appears in collections:Publikationen School of Management and Law

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