Using simulated mergers to evaluate corporate diversification strategies

Peter A. Silhan · Howard Thomas

29 citations0/0 files storedStrategic Management Journal

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Corporate Finance and Governance International Business and FDI Merger and Competition Analysis

Abstract

Abstract This study suggests that simulated mergers can be used to help evaluate the effects of diversification on corporate performance. The results, which are consistent with a risk‐reduction motive for conglomerate diversification, imply that conglomerate strategies focused on fewer and larger units may be advantageous in terms of certain measures of risk and return. Forecast error is used here to measure strategic risk, and return on equity is used to measure return.

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References

1976Markets and Hierarchies: Analysis and Antitrust Implications.1981Risk Reduction as a Managerial Motive for Conglomerate Mergers 1975Strategy, structure, and economic performance 1980Financial Theory and Corporate Policy.1982Diversification strategy and profitability 1971A PURE FINANCIAL RATIONALE FOR THE CONGLOMERATE MERGER 1982The Economics of Information and Uncertainty 1980Organizations and Environments.

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