Diversification Discount or Premium? New Evidence from Bits Establishment-Level Data

40 Pages Posted: 19 Dec 2000

See all articles by Belen Villalonga

Belen Villalonga

New York University (NYU) - Leonard N. Stern School of Business

Abstract

This paper examines whether the finding of a diversification discount in U.S. stock markets is only a data artifact of segment data. I use a new establishment-level database that covers the whole U.S. economy to construct business units that are more consistently and objectively defined across firms than what segments are. On a sample of firms that exhibit a diversification discount according to segment data, I find that, when BITS data are used, diversified firms actually trade at a significant average premium. The premium is robust to variations in the method, sample, business unit definition, and measures of excess value and diversification.

Keywords: Diversification discount; Premium; Tobin's q; Sample selection

JEL Classification: G34

Suggested Citation

Villalonga, Belen, Diversification Discount or Premium? New Evidence from Bits Establishment-Level Data. Available at SSRN: https://ssrn.com/abstract=253793 or http://dx.doi.org/10.2139/ssrn.253793

Belen Villalonga (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

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