Does diversification create value in the presence of external financing constraints?
Subtitle: evidence from the 2008-2009 financial crisis
By: Venkat Kuppuswamy, Belén Villalonga
Contributors: Villalonga, Belen; Harvard Business School
Series: Working paper / Harvard Business School -- 10-101; Working paper (Harvard Business School) -- 10-101.
Publisher: Harvard Business School
Published: 2010
Place of publication: [Boston]
Language: eng
Number of pages: 58
Description: We examine whether and why the value of diversification changed during the 2008-2009 financial crisis. We find that diversified firms increased in value relative to single-segment firms during the crisis, a result that is not driven by the endogeneity of either financing constraints or firms' diversification choices. We also find that the increase did not simply reflect changes in investor perceptions but real differences in corporate finance and investment, through two different channels: a "more money" effect arising from the debt coinsurance feature of conglomerates, and a "smarter money" effect arising from more efficient internal capital allocation.
Notes: "May 2010"--Publisher's website.

Includes bibliographical references.