Incentives for Diversification and the Structure of the Conglomerate Firm / William J. Marshall, Jess B. Yawitz, Edward Greenberg.

Format:

Book

Author/Creator:

Marshall, William J.

Contributor:

National Bureau of Economic Research.

Yawitz, Jess B.

Greenberg, Edward.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1280.

NBER working paper series no. w1280

Language:

English

Subjects (All):

Conglomerate corporations.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1984.

Cambridge, Massachussetts : National Bureau of Economic Research, [1984]

Summary:

In this paper, we examine the proposition that both the structures of conglomerate firms and their merger activities evidence a systematic attempt to diversify income sources and reduce the volatility of firms' profits. We test whether firms that are active in one line of business are more likely to be involved in another, the lower is the correlation between returns to the two activities, and whether, ceteris paribus, the likelihood of merger depends inversely on the correlation of cash flows to the principal activities of thecandidates for merger. We conclude that firms do act as if their goals include firm-level diversification.

Notes:

Print version record

February 1984.