The cost of diversity: the diversification discount and inefficient investment
In a simple model of capital budgeting in a diversified firm where headquarters has limited power, we show that funds are allocated towards the most inefficient divisions. The distortion is greater the more diverse are the investment opportunities of the firm's divisions. We test these implicat...
Gespeichert in:
| Hauptverfasser: | , , |
|---|---|
| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
London
CEPR
1998
|
| Schriftenreihe: | Centre for Economic Policy Research <London>: Discussion paper series
1801 : Financial economics |
| Schlagworte: | |
| Zusammenfassung: | In a simple model of capital budgeting in a diversified firm where headquarters has limited power, we show that funds are allocated towards the most inefficient divisions. The distortion is greater the more diverse are the investment opportunities of the firm's divisions. We test these implications on a panel of diversified firms in the U.S. during the period 1979-1993. We find that i) diversified firms mis-allocate investment funds; ii) the extent of mis-allocation is positively related to the diversity of the investment opportunities across divisions; iii) the discount at which these diversified firms trade is positively related to the extent of the investment mis-allocation and to the diversity of the investment opportunities across divisions. |
| Beschreibung: | Auch als el. Ress. verfügbar |
| Beschreibung: | 50 S. |
Internformat
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| 520 | 3 | |a In a simple model of capital budgeting in a diversified firm where headquarters has limited power, we show that funds are allocated towards the most inefficient divisions. The distortion is greater the more diverse are the investment opportunities of the firm's divisions. We test these implications on a panel of diversified firms in the U.S. during the period 1979-1993. We find that i) diversified firms mis-allocate investment funds; ii) the extent of mis-allocation is positively related to the diversity of the investment opportunities across divisions; iii) the discount at which these diversified firms trade is positively related to the extent of the investment mis-allocation and to the diversity of the investment opportunities across divisions. | |
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Datensatz im Suchindex
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| author | Rajan, Raghuram Govind 1963- Servaes, Henri Zingales, Luigi 1963- |
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| geographic | USA |
| geographic_facet | USA |
| id | DE-604.BV011933030 |
| illustrated | Not Illustrated |
| indexdate | 2024-07-09T18:18:45Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-008066146 |
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| physical | 50 S. |
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| series | Centre for Economic Policy Research <London>: Discussion paper series |
| series2 | Centre for Economic Policy Research <London>: Discussion paper series |
| spelling | Rajan, Raghuram Govind 1963- Verfasser (DE-588)128432357 aut The cost of diversity the diversification discount and inefficient investment Raghuram G. Rajan, Henri Servaes and Luigi Zingales London CEPR 1998 50 S. txt rdacontent n rdamedia nc rdacarrier Centre for Economic Policy Research <London>: Discussion paper series 1801 : Financial economics Auch als el. Ress. verfügbar In a simple model of capital budgeting in a diversified firm where headquarters has limited power, we show that funds are allocated towards the most inefficient divisions. The distortion is greater the more diverse are the investment opportunities of the firm's divisions. We test these implications on a panel of diversified firms in the U.S. during the period 1979-1993. We find that i) diversified firms mis-allocate investment funds; ii) the extent of mis-allocation is positively related to the diversity of the investment opportunities across divisions; iii) the discount at which these diversified firms trade is positively related to the extent of the investment mis-allocation and to the diversity of the investment opportunities across divisions. Budgettering gtt Grootbedrijf gtt Inversiones de capital - EE. UU - Modelos econométricos Investeringen gtt Presupuesto de capital - Modelos econométricos Ökonometrisches Modell Capital budget Econometric models Capital investments United States Econometric models Diversification in industry United States Econometric models Resource allocation Econometric models Mischkonzern (DE-588)4140747-7 gnd rswk-swf Diversifikation (DE-588)4012539-7 gnd rswk-swf Investitionsrechnung (DE-588)4027575-9 gnd rswk-swf USA Mischkonzern (DE-588)4140747-7 s Diversifikation (DE-588)4012539-7 s Investitionsrechnung (DE-588)4027575-9 s DE-604 Servaes, Henri Verfasser (DE-588)129521884 aut Zingales, Luigi 1963- Verfasser (DE-588)128432322 aut Centre for Economic Policy Research <London>: Discussion paper series 1801 : Financial economics (DE-604)BV023545932 1801 |
| spellingShingle | Rajan, Raghuram Govind 1963- Servaes, Henri Zingales, Luigi 1963- The cost of diversity the diversification discount and inefficient investment Centre for Economic Policy Research <London>: Discussion paper series Budgettering gtt Grootbedrijf gtt Inversiones de capital - EE. UU - Modelos econométricos Investeringen gtt Presupuesto de capital - Modelos econométricos Ökonometrisches Modell Capital budget Econometric models Capital investments United States Econometric models Diversification in industry United States Econometric models Resource allocation Econometric models Mischkonzern (DE-588)4140747-7 gnd Diversifikation (DE-588)4012539-7 gnd Investitionsrechnung (DE-588)4027575-9 gnd |
| subject_GND | (DE-588)4140747-7 (DE-588)4012539-7 (DE-588)4027575-9 |
| title | The cost of diversity the diversification discount and inefficient investment |
| title_auth | The cost of diversity the diversification discount and inefficient investment |
| title_exact_search | The cost of diversity the diversification discount and inefficient investment |
| title_full | The cost of diversity the diversification discount and inefficient investment Raghuram G. Rajan, Henri Servaes and Luigi Zingales |
| title_fullStr | The cost of diversity the diversification discount and inefficient investment Raghuram G. Rajan, Henri Servaes and Luigi Zingales |
| title_full_unstemmed | The cost of diversity the diversification discount and inefficient investment Raghuram G. Rajan, Henri Servaes and Luigi Zingales |
| title_short | The cost of diversity |
| title_sort | the cost of diversity the diversification discount and inefficient investment |
| title_sub | the diversification discount and inefficient investment |
| topic | Budgettering gtt Grootbedrijf gtt Inversiones de capital - EE. UU - Modelos econométricos Investeringen gtt Presupuesto de capital - Modelos econométricos Ökonometrisches Modell Capital budget Econometric models Capital investments United States Econometric models Diversification in industry United States Econometric models Resource allocation Econometric models Mischkonzern (DE-588)4140747-7 gnd Diversifikation (DE-588)4012539-7 gnd Investitionsrechnung (DE-588)4027575-9 gnd |
| topic_facet | Budgettering Grootbedrijf Inversiones de capital - EE. UU - Modelos econométricos Investeringen Presupuesto de capital - Modelos econométricos Ökonometrisches Modell Capital budget Econometric models Capital investments United States Econometric models Diversification in industry United States Econometric models Resource allocation Econometric models Mischkonzern Diversifikation Investitionsrechnung USA |
| volume_link | (DE-604)BV023545932 |
| work_keys_str_mv | AT rajanraghuramgovind thecostofdiversitythediversificationdiscountandinefficientinvestment AT servaeshenri thecostofdiversitythediversificationdiscountandinefficientinvestment AT zingalesluigi thecostofdiversitythediversificationdiscountandinefficientinvestment |