Date of this Version
Strategic Management Journal
This article investigates how securities analysts help investors understand the value of diversification. By studying the research that analysts produce about companies that have announced corporate spin-offs, we gain unique insights into how analysts portray diversified firms to the investment community. We find that while analysts' research about these companies is associated with improved forecast accuracy, the value of their research about the spun-off subsidiaries is more limited. For both diversified firms and their spun-off subsidiaries, analysts' research is more valuable when information asymmetry between the management of these entities and investors is higher. These findings contribute to the corporate strategy literature by shedding light on the roots of the diversification discount and by showing how analysts' research enables investors to overcome asymmetric information.
This is the peer reviewed version of the following article: Feldman, E. R., Gilson, S. C. and Villalonga, B. (2014), Do analysts add value when they most can? Evidence from corporate spin-offs. Strat. Mgmt. J., 35: 1446–1463., which has been published in final form at doi: 10.1002/smj.2169. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms.
analysts, spin-offs, diversification discount, information asymmetry, corporate strategy
Feldman, E. R., Gilson, S. C., & Villalonga, B. (2014). Do Analysts Add Value When They Most Can? Evidence From Corporate Spin-Offs. Strategic Management Journal, 35 (10), 1446-1463. http://dx.doi.org/10.1002/smj.2169
Date Posted: 27 November 2017
This document has been peer reviewed.