Tackling The Corporate Diversification – Value Puzzle Using The Real Options Approach
نویسندگان
چکیده
This paper analyzes the diversification-value puzzle from the Real Options (RO) approach. Our proposal conceives corporate diversification as a process which involves both the sequential replacement of prior acquired investment opportunities by assets-in-place and the generation of new valuable growth options. We argue that this conceptual framework allows to explain both documented diversification premium and discount. Using a panel sample of U.S. firms from 1998 to 2010 and controlling for the potential sample self-selection, our results suggest that diversification premiums/discounts are statistically related to growth options proxies and that the diversification strategy is more value-enhancing in those firms with a more valuable set of growth opportunities.
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