Abstract: We investigate whether good corporate governance prevents unrelated and pure financial diversification, which agency theory considers potentially non-value creating, in a panel of 47 French publicly-traded corporations in the 2000-2005 period. Going beyond prior studies, we propose and test a more comprehensive framework, which argues that a CEO is more prone to engage in potentially non-value creating diversification when s/he can have access to financial resources and when there is poor governance (i.e. both poor interest alignment and monitoring). Empirical evidence provides some support for the effectiveness of different measures, advocated and legislated as good governance devices, in preventing unrelated and pure financial diversification. While interest alignment devices appear as ineffective, monitoring devices reduce the impact of financial resources on potentially non-value creating diversification.

Abstract: This study examines how firms modify their product portfolios through product introduction and product culling in order to find good matches between their organizational capabilities and environmental changes. We define firms’ product portfolios as composed of two major elements: cross-market diversification and within-market product variations. Using the data sample of the hard disk drive industry (1987-1999), we find evidence for the tradeoff between these two aspects of product portfolio. Specifically, firms that are diversified across several markets tend to pursue little product variations within each market--they introduce products that modify only slightly the features of their existing products. In contrast, highly specialized firms aggressively introduce distinct products to increase their within-market product variations. We also find firms’ cross-market diversification increase their survival chances, while within-market product variations improve firms’ financial performance (measured in terms of annual sales).

Abstract: This paper provides evidence on how the diversification strategy has an impact on value in a sample of Eurozone firms. Specifically, the paper studies the effect of the levels and types of diversification on the premium or discount that diversified firms trade at. To achieve this aim, we propose an excess value model that incorporates the level and type of diversification. Preliminary results are consistent with the value-destroying expectations and show that diversified companies trade at a discount in the Eurozone countries. However, a more accurate analysis reveals that there is a non-linear relationship between the diversification and excess value, giving rise to an optimal level of diversification. Moreover, our results support that related diversification is more value-creating than non-related diversification.

Abstract: Wealth creation in mergers and acquisitions has been found to accrue mostly to the target firms’ shareholders. The results for the acquiring firm shareholders are not very encouraging and in general, studies indicate a curvilinear relation between diversification levels and performance. This study focuses on the abnormal returns to acquisition announcement by firms. My hypothesis is that although the diversification performance relation might be curvilinear, performance feedback might be a key determinant of who makes the value enhancing acquisitions. The focus is on specifically determining which firms are likely to make value-enhancing acquisitions? The central hypothesis is that the response to this question is based on when or the timing of these acquisitions. Preliminary results suggest that firms in problemistic search mode are more likely to make value enhancing acquisitions.