Premium
Diversification strategy and systematic risk: An empirical inquiry
Author(s) -
Thompson R. S.
Publication year - 1984
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090050208
Subject(s) - diversification (marketing strategy) , systematic risk , mergers and acquisitions , sample (material) , empirical research , business , economics , financial economics , finance , marketing , philosophy , chemistry , chromatography , epistemology
This paper presents some empirical tests of the impact of strategic diversification on a market‐based measure of firm risk. Instead of considering merely the consequences of isolated diversifying mergers, as most previous work in this area has done, the study examines the impact of all quoted acquisitions over a five year period using a sample of 100 large companies and a period of intense merger activity. The results cast further doubt on risk reduction as a general motive for diversifying merger, although they do not support the positive association between systematic risk and conglomerate status found in many US studies.