تخفیف تنوع، رانت اطلاعات و بازار سرمایه داخلی

While many existing studies report that corporate diversification destroys shareholder value, several recent studies challenge these findings. Schoar [Schoar, A. (2002). Effects of corporate diversification on productivity. The Journal of Finance, 57, 2379−2403] finds that plants in conglomerates are more productive than those in comparable single-segment firms, although conglomerates are traded at discounts. Villalonga [Villalonga, B. (2004a). Diversification discount or premium? New evidence from the business information tracking services. The Journal of Finance, 59, 479–506; Villalonga, B. (2004b). Does diversification cause the “diversification discount”. Financial Management, 33, 5−27] employs a more comprehensive database and statistical techniques than those used in the prior studies, and shows that there is a diversification premium, rather than discount. This paper develops a model that highlights the costs and benefits of corporate diversification. The diversified firm trades off the benefits of more efficient resource allocation through its internal capital market against the costs of information rents to division managers, which are necessary for effective workings of the internal capital market. We provide an argument supporting Schoar's findings, and identify conditions under which there can be a diversification discount or a premium.

The benefits and costs of corporate diversification have been the subject of extensive research.1 Diversified firms can rely on internal capital markets that enable them to pool and reallocate corporate resources more efficiently through ‘winner picking’ than through external financing (Stein, 1997 and Williamson, 1975). They may also enjoy economies of scope, and gain strategic benefits by extending market power from one segment to another, and by facilitating tacit collusion through multi-market interactions. On the other hand, corporate diversification can exacerbate managerial agency problems (Jensen, 1986 and Jensen, 1993). How do these benefits and costs weigh up against each other? When are diversified firms more likely to perform better or worse than their stand-alone counterparts? Earlier empirical studies on the effect of corporate diversification on firm performance find that diversified firms tend to have lower Tobin's Q, and are traded at discounts of up to 15 percent relative to comparable profiles of single-segment firms (Berger & Ofek, 1995; Lang & Stulz, 1994; Servaes, 1996). This has been known as the diversification discount, confirming the conventional wisdom that corporate diversification destroys shareholder value. Several theoretical studies offer explanations of the diversification discount based on agency theory (e.g., Matsusaka & Nanda, 2002; Stulz, 1990). They argue that the free cash flow problem can be more severe in conglomerates since they have larger investment opportunities and more accessible resources to do so if diversification can relax budget constraints imposed by imperfect capital markets. Although this theory focusing on the agency problem at the level of CEOs can explain overinvestment, it cannot address the issue of fund misallocation within conglomerates. To analyze resource allocation within multidivisional firms, several studies look at the internal capital market of a multidivisional firm and identify the source of inefficient cross-subsidization. Scharfstein and Stein (2000) present a model illustrating the interaction between the CEO and the division managers within a multidivisional firm where both the CEO and the division managers enjoy private benefits of control by remaining on the job. In their model, the manager of a weak division has a lower opportunity cost of rent-seeking than the manager of a strong division. By rent-seeking, the manager of a weak division can increase bargaining power, to which the CEO reacts by distorting capital budgeting allocations in favor of the weak division. In Rajan, Servaes, & Zingales (2000), internal power struggles in diversified firms lead to misallocation of resources. When the divisions are similar in their resources and investment opportunities, there is no distortion in resource allocation. However, when the divisions are sufficiently diversified, the struggles result in resources flowing toward the most inefficient division, because it makes the weak division behave more cooperatively in joint production with other divisions.2Inderst and Laux (2005) show how competition for scarce corporate resources can enhance managerial incentives to work hard when the divisions are symmetric in cash endowments and growth potentials. But when the divisions are asymmetric, competition may reduce incentives for some managers and lower total firm value. In sum, one can take these explanations as a possible answer for the diversification discount, which is positively related to the extent to which the divisions are asymmetric in their resources and investment opportunities. Although Campello (2002) documents empirical evidence suggesting that the frictions between conglomerate headquarters and external capital markets are responsible for the inefficiency of internal capital markets, many recent empirical studies directly question the interpretation and the findings of the earlier studies on the diversification discount. While the diversification discount can be real, the discount could be due to a selection bias: the firms that diversify are traded at discounts prior to diversification, and the firms acquired by conglomerates are traded at discounts before acquisition (Campa & Kedia, 2002; Graham, Lemmon, & Wolf, 2002; Lamont & Polk, 2001). Moreover, other studies go on further showing that diversification can create shareholder value or lead to higher productivity at plant level. Villalonga (2004a) shows how typical studies based on reported business segment data can understate the extent of diversification. Using the more comprehensive Business Information Tracking Series, she reports that diversified firms are traded at a significant premium. Villalonga (2004b) further shows that her findings are robust to alternative statistical techniques. Schoar (2002) reports that plants in diversified firms are more productive than those in comparable single-segment firms, although conglomerates are traded at an average discount.3 She conjectures that rent dissipation is responsible for this discrepancy and offers suggestive evidence that conglomerates pay higher wages to their employees.4 Given that the empirical evidence on the diversification discount is at best mixed, it is necessary to develop a model that can clarify the costs and benefits of corporate diversification, and identify conditions that lead to a diversification discount or a premium. Our paper addresses this issue by studying investment decisions in a multidivisional firm. Our key argument is that local information held by division managers is crucial for efficient workings of internal capital markets. However, communication of local information is costly: division managers should be given incentives to truthfully communicate their local information, which takes the form of information rents. Thus a multidivisional firm trades off the benefits of internal capital markets against the costs of information rents accrued to division managers for communication of their private information. For an illustrative purpose, consider two operating divisions, which can be incorporated either separately to form two stand-alone firms or jointly to form a conglomerate. We assume that investment is constrained by firms’ own internal resources or limited capital that can be raised through imperfect external capital markets. Thus each stand-alone firm has its investment fund limited to its own resources. But the conglomerate can pool the resources available in both divisions, thereby breaking the budget constraint for a division with a superior investment opportunity. This represents a potential advantage of the conglomerate over the stand-alone firms. Each division is run by a division manager, who has private information about the state of his division. The CEO of the conglomerate has the authority to pool and reallocate divisional resources but her capital allocation decision depends on the report from the division managers about the states of their divisions. We assume that each division manager derives private benefits from running the division, which increase in the revenue from investment in the division.5 The division managers have therefore incentives to misrepresent their investment opportunities in order to get more investment funds. But they cannot be penalized for lying due to limited liability. Thus incentive compatibility and limited liability require that the division managers be rewarded for truth-telling. Such information rents are the cost of using the internal capital market in the conglomerate. We show that the information rents are generally larger in the conglomerate than in stand-alone firms. Thus the very advantage of internal capital market – pooling resources and picking a winner – is likely to result in higher operation costs. We identify conditions under which the benefits of internal capital market are outweighed by the costs of information rents. Our model shares with Wulf (2000) and Bernardo, Cai, & Juo (2004) the common feature that the division managers of a multidivisional firm have information advantage relative to the headquarters. In Wulf's model, the two divisions are asymmetric and the manager of the large and established division is more powerful, who can manipulate the information about uncertain returns of the small and new division, while the manager of the small division is a passive agent. The headquarters uses the capital budget to prevent the manager of the large division from engaging in influence activities. Bernardo et al. (2004) show how to jointly optimize capital budgeting and managerial compensation to control the agency problem in a multidivisional firm. As mentioned before, Scharfstein and Stein (2000) show, under the assumption of symmetric information, that the rent-seeking behavior of division managers can distort internal capital allocation. However, these studies do not explicitly address the issue of differences in managerial compensation caused by different organizational structures. Moreover, there are no distortions in capital allocation in our model. Instead, the possible low profitability of the conglomerate is due to rent dissipation to division managers. The rest of the paper is organized as follows. Section 2 describes the basic model, which is analyzed in Section 3. Section 4 discusses extensions of the basic model. The final section offers the empirical implications from our findings. The proofs of all propositions are relegated to the Appendix A.