Download This PaperDoes Corporate Diversification Reduce Firm Risk? Evidence from Diversifying Acquisitions
28 Pages Posted: 7 Feb 2011
Date Written: February 5, 2011
Abstract
Whether corporate diversification decreases or increases the risk of the diversifying firm is an important empirical question. We investigate this issue using a sample of diversifying acquisitions and various risk measures. We find that corporate diversification tends to decrease the risk of some firms but increase the risk of many others, and on average corporate diversification does not lower firm risk. These findings call into question the notion that corporate diversification strictly reduces firm risk.
Keywords: Diversification, Firm Risk, Mergers, Acquisitions
JEL Classification: G10, G30, G34
Suggested Citation: Suggested Citation
Randy I. Anderson
City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )
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