By theory, opinions of managers, creditors, and stockholders differ greatly regarding the merits of corporate diversification. For example, managers may want their firm to engage in diversification as a means of reducing firm specific risk that affects the value of their future compensation. Similarly, the firm’s creditors may prefer that the firm diversify its investments to reduce the likelihood of a dip in cash flows that could result in delays in repayment or outright failure to repay loans. At the same time, stockholders who own diversified portfolios of common stocks may not want the firm to diversify if they can do it more cheaply in their individual investment portfolios. From the point of view of the diversified stockholder, when we …show more content…
2001). However, evidence on the effectiveness of diversification is mixed. In the earlier years, there was strong consensus that diversification destroyed value and diversified firms suffered from a ‘diversification discount’ (Lang and Stultz 1994, Berger and Ofek 1995, Servaes 1996). However, later studies questioned the data and methodology used in these studies (Villalonga 2004a, Campa and Kedia 2002, Martin and Sayrak, 2003). Villalonga used two different databases and showed that studies based on one of them showed evidence of a diversification discount, while research on the other supported the hypothesis of a diversification premium. Her explanation of the result was that the former database showed unrelated (conglomerate) diversification while the latter showed related diversification. These new studies claimed that diversification discount was non-existent and there was actually a premium to diversification, implying that under certain circumstances, diversification creates …show more content…
if diversification is beneficial (detrimental) to the firm, it should result in higher (lower) productivity for diversified firms. Lichtenburg however used the US Census Bureau’s data on manufacturing plant-wise data and showed that diversification impacts firm productivity negatively. On the other hand, Schoar (2002) used a similar, but larger data set from the US Census Bureau’s Longitudinal Research Database and found a positive correlation between diversification and productivity of the firm. Chang et al. (2011) state that a possible explanation for this difference in opinion could be the lack of differentiation between related and unrelated diversification. They use this concept to build upon a paper to relate productivity and diversification, while keeping the distinction between related and unrelated diversification clear. They use the Data Envelopment Analysis (DEA) method to measure a firm’s relative productivity and the Entropy Measure and its decomposed components as proxies for total, related and unrelated diversification. They conclude, based on their research of data on firms of all sectors, that related (unrelated) diversification contribute to the increase (decrease) of
The Hershey manufacturer and the Tootsie Roll company both are firms in confection enterprise; they specialize in a vast form of chocolate sweet products. I compared each companies for the years 2002, 2003, and 2004 towards every different and in opposition to the enterprise averages so as to make a selection about which organization investors would decide on to put money into. The comparisons I used to make this decision were ratios for liquidity, solvency, and
Typical value creation approach for Exxel The Exxel group was one of the pioneers of Latin American private equity. It was successful through the value creation in the buyouts, recapitalizations, acquisitions and mergers. The founder of Exxel, Juan Navarro sought to build unique deals, focused on local business, and then create value to these enterprises.
Different diversities of many human populations believe Canada is one of the best places to live in. What is their reason for this belief? Canada is home to many citizens who take pride in their identities that set them apart from other people. Social, economic, and political factors can influence the identities of many Canadians today. Society in Canada differs from other countries and provides a safe atmosphere for all citizens.
What is diversity? Diversity is differences in tastes. Diversity is strongly determined based on many different factors. One of these factors is age. Movies made in the 70’s are completely different from more recent movies made recently.
Diversity in the united state has been extended to a broader understanding of what diversity really means. Diversity first meaning is that positions should not be segregated by gender. For example a board of directors should have women on the board and there should be a male as the receptionists. Next be the diversity of wide range of ethnicities like Asian, Hispanics, etc., religions national origins, class. For example people from poor and rich should both be represented.
Introduction Since 1996, Royal Dutch Shell (Shell) had been promoting the diversity and inclusion (D&I) initiatives, which aimed to increase the variety of compositions and values the differences such as, age, sex, gender, race, nationality, and education (Sucher & Corsi, 2012, p. 5). Yet, Voser’s, the new Chief Executive Officer, Top Management Team (TMT), was dominated by middle-age American and European men from 2008 to 2009. Because diversity could have both positive and negative impacts on the company (Webber and Donahue, 2001) and the nature of industry as well as the contextual circumstances could both support or hinder various diversity characteristics (Cannella et al., 2008), the implications regarding the short run situations and
Diversity may mean different things to different people. To me, diversity is exactly that, being different and unique. Diversity makes the world a beautiful place to be, and full of interesting and different people. The beauty of human civilization lies in its diverse groups and cultures.
Introduction The main objective of this particular case study is to assist Victor Dubinski, the current CEO of Blaine Kitchenware, decide whether or not repurchasing shares and changing the firm’s capital structure in favor of more debt could actually be benefit the company and its shareholders. Blaine Kitchenware is a small cap, public company who focuses on selling various different residential kitchen appliances. Up until this point, the company has only used cash and equity financing to acquire independent kitchen appliance manufacturers, and expand into foreign markets abroad. Given their excess cash and lack of debt, Blaine Kitchenware is considered to be “over-liquid and under-leveraged” (Luehrman & Heilprin, 2009).
Mergers and Acquisitions and Shareholder Wealth: The theory of finance states that maximization of shareholder wealth should be the goal of every business organization. It is not clear, however, whether maximization of shareholder wealth is the main motivation behind Mergers and acquisitions. This has generated a lot of research interest the area. Unfortunately decades of intensive research have not been able to conclusively establish the impact of Mergers and acquisitions on shareholder wealth.
Case Study 1: Banc One Corporation Asset and Liability Management Gizem Akkan So basically, the main problem Banc One Corporation has falling share prices as it is written from a 48 ¾ to 36 ¾ in April 1993. The basic reason behind this decline is that its exposure to derivative securities. This decline in share prices raises concerns among the Banc One’s Investors as well as its analysts since they are uncomfortable with huge amount of derivative usage particularly swaps. They think they are not able to measure risks they exposed so this create uncertainity about the firm’s financial stability.
Business risk of GSAP they are going to buy: that it will not fail o Business risk= more business risk means more variability in operating profit which means a higher beta so adjust the Beta coefficient to match it with the level of financial risk incurred by the company. • Beta: Sterling’s proposed acquisition is 0.99 (beta is leveraged on the debt/equity ratio) [Exhibit 7] • Growth opportunities were limited and its business was under constant pressure • The company’s annual sales volume (in units) had increased by less than 1% per year, because of weak growth in overall demand and other company competition, which gives consumers the ability to choose other products • Business risk of buying at $265 million: relevantly low (where there
INTRODUCTION This assignment will focus on explaining the importance of diversity management, challenges of management diversity, give strategies and implementation of management diversity in the workplace. A diverse workforce is a reflection of a changing world and marketplace. Diverse work teams bring high value to organizations. Respecting individual differences will benefit the workplace by creating a competitive edge and increasing work productivity.
INTRODUCTION This assignment is set up into two parts. The first part will be the theoretical part, where we will be discussing the concept of the chosen topic, Diversity Management. We as a group will collect definitions from various sources in order to get a broader understanding of Diversity Management. Thereafter we will look at the analytical part of Diversity Management.
All students deserve to be treated fairly as individuals. When considering the diversity of the class members, we will celebrate the uniqueness that the differences contribute. Because I have high expectations that all my children can be successful, adjustments may be necessary because everyone is not the same (Burden, 2017, p. 115). It is vital that a spirit of understanding and edification is active amongst the students and from the teacher (Romans 14:19, King James Version) to produce fruits of mutual respect: reduced bias, positive academic outcomes, enhanced problem solving, and healthy group dynamics (Cousik, 2015, p. 54). For differences that stem from culture, gender, ethnicity, or socioeconomic status, the adjustments will involve bridging the cultural gap between the students’ diversity and the curriculum.
The attractiveness is the overall profitability of the industry whilst unattractiveness drives down profitability. Thus using this model, it implies that profitability or the return is a constant integer, across firms and industries; however various studies established that different industries have different levels of profitability due to their diverse structure and circumstances they operate in. The model can also be utilized to develop an edge over competitors and rudimentarily for identifying a niche whether it is potentially feasible to manufacture new products, services or open new