Accounting implications of corporate diversification

Article Abstract:

The impact of corporate diversification an accounting reports was investigated. Data from 400 firms were studied for the period 1977 to 1984. The results indicated that companies that diversified into unrelated areas had smaller differences between historical-cost values and replacement-cost values of assets than undiversified companies. The inflation-adjusted data of diversified companies exhibited less incremental information content than the data of undiversified companies. Diversified companies had a stronger market relationship with changes in earnings, and they used more liberal accounting methods than undiversified firms.

Conglomerate corporations, Accounting and auditing, Accounting

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Efficient corporate diversification: methods and implications

Article Abstract:

A measure of efficient corporate diversification that compares the variability of a minimum-variance portfolio of similar growth rate businesses with the variability of the test firm's revenues is developed and tested. Results indicate that efficient diversifiers: reduce the variability of returns without sacrificing profitability; posses a favorable trade-off between risk and return in the equity market; and are found to be less diversified across different standard industrial classification industries. Efficient diversifiers also minimize operating risk and enjoy diversification by staying in related business segments.

Management science, Business cycles

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Entrepreneurial ability, venture investments, and risk sharing

Article Abstract:

A model of the entrepreneur-venture capitalist relationship is presented. The model indicates that entrepreneurs whose skill levels are common knowledge will enter venture capital agreements, entrepreneurs whose skill levels are lower will enter venture capital agreements, and some entrepreneurs will invest in a costly signal that will convey their abilities and then sell to investors.

Models, Economics, Venture capital, Entrepreneurship

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