What Do We Know About Cross-subsidization? Evidence from Merging Firms
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| 024 | 7 | 0 | |a 10.2202/1538-0637.1218 |2 doi |
| 035 | |a (NATIONALLICENCE)gruyter-10.2202/1538-0637.1218 | ||
| 100 | 1 | |a Chevalier |D Judith |u 1Yale University, judith.chevalier@yale.edu | |
| 245 | 1 | 0 | |a What Do We Know About Cross-subsidization? Evidence from Merging Firms |h [Elektronische Daten] |c [Judith Chevalier] |
| 520 | 3 | |a A substantial empirical literature documents value-destroying "cross-subsidization” among the divisions of diversified firms. However, this literature relies upon two maintained hypotheses: that divisions of diversified firms are randomly allocated to their corporate parents and that the investment opportunities facing conglomerate divisions are identical to those of stand-alone firms in their industries. I examine the investment behavior prior to merger of a sample of firms that undertook diversifying mergers between 1980 and 1995. I show that, in my sample, investment patterns that the literature has attributed to cross-subsidization between divisions are apparent in the pairs of merging firms prior to their mergers. Thus, some of the cross-subsidization results in the literature may be attributable to selection bias. I also examine stock market responses to announcements of diversifying acquisitions. The event responses are largely independent of measures of the extent to which the merger is diversifying. | |
| 540 | |a ©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston | ||
| 690 | 7 | |a diversification |2 nationallicence | |
| 690 | 7 | |a investment |2 nationallicence | |
| 773 | 0 | |t Advances in Economic Analysis & Policy |d De Gruyter |g 4/1(2004-04-18) |q 4:1 |1 2004 |2 4 |o bejeap | |
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| 950 | |B NATIONALLICENCE |P 100 |E 1- |a Chevalier |D Judith |u 1Yale University, judith.chevalier@yale.edu | ||
| 950 | |B NATIONALLICENCE |P 773 |E 0- |t Advances in Economic Analysis & Policy |d De Gruyter |g 4/1(2004-04-18) |q 4:1 |1 2004 |2 4 |o bejeap | ||
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