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    • College of Agriculture, Food and Natural Resources (MU)
    • Division of Applied Social Sciences (MU)
    • Department of Agricultural Economics (MU)
    • Agricultural Economics publications (MU)
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    Were the Acquisitive Conglomerates Ineffective?

    Klein, Peter G.
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    [PDF] Were the acquisitive conglomerates....pdf (808.2Kb)
    Date
    2001-01
    Format
    Article
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    Abstract
    This article challenges the conventional wisdom that the 1960s conglomerates were inefficient. I offer valuation results consistent with recent event-study evidence that markets typically rewarded diversifying acquisitions. Using new data, I compute industry-adjusted valuation, profitability, leverage, and investement ratios for 36 large, acquisitive conglomerates from 1966 to 1974. During the early 1970s, the conglomerates were less valuable and less profitable than stand-alone firms, favoring an agency explanation for unrelated diversification. In the 1960,s however, conglomerates were not valued at a discount. Evidence from acquisition histories suggests that conglomerate diversification may have added value by creating internal capital markets.
    URI
    http://hdl.handle.net/10355/153
    Citation
    RAND Journal of Economics vol. 32, no. 4 (Winter 2001): 745-61.
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    • Agricultural Economics publications (MU)

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