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Media type:
E-Article
Title:
Does Information Asymmetry Explain The Diversification Discount?
Contributor:
Best, Ronald W.;
Hodges, Charles W.;
Lin, Bing‐Xuan
Published:
Wiley, 2004
Published in:
Journal of Financial Research, 27 (2004) 2, Seite 235-249
Language:
English
DOI:
10.1111/j.1475-6803.2004.t01-1-00081.x
ISSN:
0270-2592;
1475-6803
Origination:
Footnote:
Description:
AbstractWe examine the diversification discount while controlling for differences in information asymmetry between diversified and nondiversified firms. We show that both diversified and nondiversified firms with higher levels of information asymmetry have discounted firm values relative to firms with lower levels of information asymmetry, although a diversification discount remains at all levels of information asymmetry. Fixed‐effect Fama‐MacBeth regressions confirm the existence of a statistically significant relation between information asymmetry proxies and excess value, but they also show that a significant diversification discount remains after controlling for differences in information asymmetry and other firm characteristics discussed in earlier studies (e.g., size, profitability, leverage, and capital constraint).