Abstract
We investigate the value effects of two types of corporate diversification - unexpected exogenous diversification and endogenous diversification. Combining Heckman's sample-selection estimator with a two-stage least squares estimator and a generalized method of moments instrumental variables estimator to control for both endogeneity and sample-selection bias, we find that while an unexpected increase in diversification caused by exogenous shocks destroys firm value, an endogenous increase in diversification due to managerial decisions will enhance firm value, indicating a diversification premium from altering organizational structures.
| Original language | English |
|---|---|
| Pages (from-to) | 375-397 |
| Number of pages | 23 |
| Journal | International Review of Finance |
| Volume | 12 |
| Issue number | 4 |
| DOIs | |
| Publication status | Published - Dec 2012 |