Access the full text.
Sign up today, get DeepDyve free for 14 days.
Wilbur Lewellen (1971)
A PURE FINANCIAL RATIONALE FOR THE CONGLOMERATE MERGERJournal of Finance, 26
D. Scharfstein, J. Stein (1997)
The Dark Side of Internal Capital Markets: Divisional Rent-Seeking and Inefficient InvestmentCorporate Finance: Valuation
John Mcconnell, H. Servaes (1990)
Additional evidence on equity ownership and corporate valueJournal of Financial Economics, 27
Darius Palia (2001)
The Endogeneity of Managerial Compensation in Firm Valuation: A SolutionReview of Financial Studies, 14
U. Peyer, Anil Shivdasani (2001)
Leverage and internal capital markets: evidence from leveraged recapitalizationsJournal of Financial Economics, 59
Michael Jensen (1986)
Agency Cost of Free Cash Flow, Corporate Finance, and TakeoversIndustrial Organization & Regulation eJournal
Morck, Randall, Andrei Shleifer, W. Robert Vishny (1988)
Management Ownership and Market ValuationJournal of Financial Economics, 20
E. Fama, James MacBeth (1973)
Risk, Return, and Equilibrium: Empirical TestsJournal of Political Economy, 81
Jensen, C. Michael (1986)
Agency Costs of Free Cash Flow, Corporate Finance and TakeoversAmerican Economic Review, 76
Hyun-Han Shin, René Stulz (1998)
Are Internal capital Markets EfficientQuarterly Journal of Economics, 113
Philip Berger, E. Ofek (1995)
Diversification's effect on firm valueJournal of Financial Economics, 37
René Stulz (1990)
Managerial discretion and optimal financing policiesJournal of Financial Economics, 26
René Stulz (1993)
Tobin's q, Corporate Diversification, and Firm PerformanceJournal of Political Economy, 102
Toni Whited (2001)
Is It Inefficient Investment that Causes the Diversification DiscountJournal of Finance, 56
Rajesh Aggarwal, Andrew Samwick (2001)
Why Do Managers Diversify Their Firms? Agency ReconsideredOrganizations & Markets eJournal
R. K. Aggarwal, A. A. Samwick (2003)
Why do Managers Diversify their Firms? Agency ReconsideredThe Journal of Finance, 58
R. Morck, Andrei Shleifer, Robert Vishny (1988)
Management Ownership and Market Valuation: An Empirical AnalysisJournal of Financial Economics, 20
Scharfstein, S. David, Jeremy C. Stein (2000)
The Dark Side of Internal Capital Markets: Divisional Rent-seeking and Inefficient InvestmentThe Journal of Finance, 55
The separate associations between financial leverage and valuation and between diversification and valuation have been widely researched. The joint function of leverage, diversification, and valuation, however, has received much less attention. Previous research shows that compared to specialized firms, diversified firms tend to have higher free cash flows and fewer high net present value investment opportunities. Consequently, the agency costs associated with potential overinvestment are greater for diversified firms. The literature also proposes that financial leverage should reduce agency costs. Consequently, we expect that the values of diversified firms increase with leverage. Our tests provide strong support for the hypothesis that the values of diversified firms increase with leverage. This tendency is not observed for specialized firms.
Review of Quantitative Finance and Accounting – Springer Journals
Published: Jan 1, 2005
Read and print from thousands of top scholarly journals.
Already have an account? Log in
Bookmark this article. You can see your Bookmarks on your DeepDyve Library.
To save an article, log in first, or sign up for a DeepDyve account if you don’t already have one.
Copy and paste the desired citation format or use the link below to download a file formatted for EndNote
Access the full text.
Sign up today, get DeepDyve free for 14 days.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.