Does Information Asymmetry Explain The Diversification Discount

@inproceedings{Best2004DoesIA,
  title={Does Information Asymmetry Explain The Diversification Discount},
  author={Ronald W. Best and Charles W. Hodges and Bing-xuan Lin},
  year={2004}
}
We examine the diversification discount while controlling for differences in information asymmetry between diversified and nondiversified firms. We show that both diversified and nondiversified firms with higher levels of information asymmetry have discounted firm values relative to firms with lower levels of information asymmetry, although a diversification discount remains at all levels of information asymmetry. Fixed-effect Fama-MacBeth regressions confirm the existence of a statistically… CONTINUE READING