Diversification to Mitigate expropriation in the Tobacco Industry

  title={Diversification to Mitigate expropriation in the Tobacco Industry},
  author={Messod D. Beneish and Ivo Ph. Jansen and Melissa F. Lewis and Nathan V. Stuart},
  • Messod D. Beneish, Ivo Ph. Jansen, +1 author Nathan V. Stuart
  • Published 2008
While it is well established that diversifying acquisitions by large, cash-rich firms destroy shareholder wealth, we document positive abnormal returns to such acquisitions in the tobacco industry. We show that these abnormal returns are associated with proxies for lower expected expropriation costs. Specifically, we show that wealth creation increases in the degree of domestic geographic expansion afforded by the acquisition (increasing tobacco firms’ influence in more political districts) and… CONTINUE READING

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