performance and diversification benefits of fund of hedge funds

外企英语笔试题及答案一、选择题（每题2分，共20分）1. Which of the following is NOT a reason for a company to go global?A) To increase market share.B) To reduce production costs.C) To avoid competition.D) To improve brand recognition.答案：C2. The term "outsourcing" refers to:A) Hiring foreign workers.B) Purchasing services or products from an external provider.C) Selling products to foreign markets.D) Investing in foreign companies.答案：B3. What is the meaning of "synergy" in the context of business?A) The combined effect is greater than the sum of its parts.B) The process of merging two companies.C) The act of competing against another company.D) The strategy of reducing costs by eliminating redundancies. 答案：A4. In business, "due diligence" usually refers to:A) The process of paying close attention to details.B) The legal obligation to be honest in business dealings.C) The investigation of a potential investment or acquisition.D) The requirement to have a certain level of education.答案：C5. Which of the following is an example of a non-tangible asset?A) Land.B) Machinery.C) Trademark.D) Inventory.答案：C6. What does "B2B" stand for in business?A) Business to Business.B) Business to Consumer.C) Business to Government.D) Business to Retailer.答案：A7. If a company is "vertically integrated," it means that:A) It owns all the stages of the supply chain.B) It specializes in one particular product line.C) It operates in multiple industries.D) It is heavily reliant on external suppliers.答案：A8. The acronym "ROI" stands for:A) Return on Investment.B) Risk of Investment.C) Rate of Interest.D) Revenue of Investment.答案：A9. A "franchise" is a type of business arrangement where:A) A company sells its products to another company.B) A company licenses its business model to another entity.C) A company acquires another company.D) A company merges with another company.答案：B10. What is "SWOT analysis"?A) A method for evaluating a company's strengths, weaknesses, opportunities, and threats.B) A type of financial statement.C) A way to measure customer satisfaction.D) A tool for predicting market trends.答案：A二、填空题（每题1分，共10分）1. The process of a company expanding its business to foreign countries is known as ______.答案：internationalization2. When a company's stock price rises above its initialoffering price, it is said to be ______.答案：above the market3. A ______ is a document that outlines the business's goals, strategies, and plans for achieving those goals.答案：business plan4. The term "blue-chip" refers to stocks that are consideredto be ______.答案：highly stable and reliable5. In finance, "leverage" refers to the use of borrowed money to ______.答案：increase potential returns6. The ______ is the process of identifying, analyzing, and mitigating potential risks.答案：risk management7. A ______ is a financial instrument that represents ownership in a company.答案：share8. The ______ is the highest level of management in a company, responsible for setting overall direction and strategy.答案：board of directors9. A ______ is a type of investment that is not easily converted to cash.答案：illiquid asset10. The ______ is the process of identifying and analyzing the needs and problems of potential customers and creating products or services to meet those needs.答案：market research三、简答题（每题5分，共30分）1. What are the benefits of a company engaging in international trade?答案：The benefits of international trade for a company include access to new markets, economies of scale, diversification of risk, and the ability to source raw materials and labor at lower costs.2. Explain the concept of "corporate social responsibility" (CSR).答案：Corporate social responsibility (CSR) refers to a company's commitment to manage its impact on the environment, consumers, employees, communities, stakeholders, and all other parts of society. It involves a company's efforts to improve society by engaging in ethical practices, community development, and environmental sustainability.3. What is the difference between a "sole proprietorship" anda "partnership"?答案：A sole proprietorship is a type of business owned by one person who has complete control and unlimited liability for the business's debts. A partnership is a business owned by two or more people who share the profits, management, and legal responsibilities of the business。

金砖国家领导人第五次会晤德班宣言(二0一三年三月二十七日)Fifth BRICS SummitDurban: 27 March 2013BRICS and Africa: Partnership for Development, Integration and Industrialization eThekwini Declaration1、我们，巴西联邦共和国、俄罗斯联邦、印度共和国、中华人民共和国和南非共和国领导人于2013年3月27日在南非德班举行金砖国家领导人第五次会晤。

我们围绕“金砖国家与非洲:致力于发展、一体化和工业化的伙伴关系”的主题进行了讨论。

本次会晤是金砖国家第一轮领导人会晤的收官之作。

我们重申将致力于维护国际法、多边主义和联合国的中心地位。

我们的讨论表明金砖国家的团结进一步加深,愿为全球和平、稳定、发展与合作做出积极贡献。

我们还讨论了金砖国家在与各国和各国人民团结合作的基础上,在国际体系中发挥的作用。

1. We, the leaders of the Federative Republic of Brazil, the Russian Federation, the Republic of India, the People's Republic of China and the Republic of South Africa, met in Durban, South Africa,on 27 March 2013 at the Fifth BRICS Summit. Our discussions took place under the overarching theme, "BRICS and Africa: Partnership for Development, Integration and Industrialization." The Fifth BRICS Summit concluded the first cycle of BRICS Summits and we reaffirmed our commitment to the promotion of international law, multilateralism and the central role of the United Nations (UN). Our discussions reflected our growing intra-BRICS solidarity as well as our shared goal to contribute positively to global peace, stability, development and cooperation. We also considered our role in the international system as based on an inclusive approach of shared solidarity and cooperation towards all nations and peoples.2、此次会晤举行之时,正需要我们探讨共同关心并具有系统重要性的问题,以解决共同关切,研拟长期解决之道。

《高等学校商务英语专业本科教学质量国家标准》的地方性解读：国标与校标的对照孙毅提要：《高等学校商务英语专业本科教学质量国家标准》为方兴未艾的商务英语专业量身定制了办学的基本条件和要求。

本文将之与西安外国语大学商务英语专业在学科定位、课程设置、校外实习基地建设、专业方向与资格认证等方面进行了系统比较，进而指出我国高校商务英语专业应在遵循国家标准的前提下苦练内功，制定符合学校办学实际的标准，走和而不同的内涵式、可持续的特色发展之路。

关键词：商务英语；国家标准；地方标准Abstract ：The National Criteria of Teaching Quality for Undergraduate Business English Majors has been enacted and provided fundamental conditions and minimum requirements for the newly-emerging and flourishing business English majors．This article makes a systematic comparison between the national criteria and the case of the business English major at Xi'an International Studies University in terms of discipline orientation ，curriculum design ，practice bases ，professional directions ，and qualification certification．It further asserts that guided by the national criteria ，business English majors at universities and colleges in our country ought to formulate their own criteria in conformity with local realities ，and take a sustainable development path of diversified harmony and distinctive features．Key words ：business English ；national criteria ；local criteria中图分类号：H319文献标识码：A 文章编号：1004－5112（2016）02－0046－07一、引言随着经济全球化和信息一体化的快速发展，国际贸易和交流日趋频繁，社会对应用型商务英语人才的需求更加迫切。

THE JOURNAL OF FINANCE•VOL.LV,NO.1•FEBRUARY2000The Cost of Diversity:The Diversification Discount and Inefficient InvestmentRAGHURAM RAJAN,HENRI SERVAES,and LUIGI ZINGALES*ABSTRACTWe model the distortions that internal power struggles can generate in the allo-cation of resources between divisions of a diversified firm.The model predicts thatif divisions are similar in the level of their resources and opportunities,funds willbe transferred from divisions with poor opportunities to divisions with good op-portunities.When diversity in resources and opportunities increases,however,re-sources can f low toward the most inefficient division,leading to more inefficientinvestment and less valuable firms.We test these predictions on a panel of diver-sified U.S.firms during the period from1980to1993and find evidence consistentwith them.T HE FUNDAMENTAL QUESTION IN THE THEORY of the firm,raised by Coase~1937! more than60years ago,is how decisions taken inside a hierarchy differ from those taken in the marketplace.Coase suggested that decisions within a hierarchy are determined by power considerations rather than relative prices.If this is indeed the case,why,and when,does the hierarchy domi-nate the market?A major obstacle to progress in this area has been the lack of data.Data on internal decisions made by firms are generally proprietary.Even when they are available to researchers,it is difficult to find a comparable group of decisions taken in the market.A notable exception is the capital allocation decision in diversified firms.Since1978,public panies have been forced to disclose their data on sales,profitability,and investments by major lines of business~segments!.An analysis of a small sample of multisegment firms reveals that segments correspond,by and large,to distinct internal *Rajan is from the University of Chicago,Servaes is from the London Business School and University of North Carolina at Chapel Hill,and Zingales is from the University of Chicago. Rajan and Zingales acknowledge financial support from the Center for Research on Security Prices at the University of Chicago.Servaes acknowledges financial support from the O’Herron and McColl faculty fellowships,University of North Carolina at Chapel ments from Sugato Bhattacharya,Judy Chevalier,Glenn Ellison,Milton Harris,Steven Kaplan,Owen La-mont,Colin Mayer,Todd Milbourn,Vikram Nanda,Jay Ritter,RenéStulz,Robert Vishny,Ralph Walkling,Wanda Wallace,two anonymous referees,and especially Mitchell Petersen are grate-fully ments from participants in seminars at AT Kearney~London!,the University of Chicago,Cornell University,the University of Georgia,the University of Florida, the University of Illinois,the London School of Economics,New York University,Northwestern University,Ohio State University,the College of William&Mary,Vanderbilt University,and Yale University were useful.3536The Journal of Financeunits of the firm.Since the investment decision is perhaps the most impor-tant of corporate decisions,these data allow researchers an opportunity to compare decisions taken by units within hierarchies with decisions taken by independent units in the same industry,and thus obtain insights on how hierarchies and markets differ.Previous research~Lamont~1997!and Shin and Stulz~1998!!has shown that resource allocation in diversified firms does appear different from that in focused firms and seems to ignore traditional market indicators of the value of investment such as Tobin’s q.Moreover,there seems to be a con-nection between resource~mis!allocation and the value of diversified firms. Berger and Ofek~1995!find that investment by diversified firms in seg-ments that have low q is correlated with the discount at which these firms trade.So perhaps such misallocation explains why diversified firms trade, on average,at a discount relative to a portfolio of single-segment firms in the same industries~Lang and Stulz~1994!,Berger and Ofek~1995!,Ser-vaes~1996!,Lins and Servaes~1999!!.But these facts simply heighten the puzzle.What is it in a hierarchy that makes diversified firms misallocate funds?Moreover,what accounts for the wide dispersion in diversified firm values,with fully39.3percent trading at a premium in1990?1To answer these questions,we first need a theoretical framework to un-derstand the phenomenon.At least three kinds of models have been pro-posed to explain how the divisions of diversified firms behave differently from stand-alone firms.Efficient Internal Capital Market models typically suggest that diversification creates value.By forming an internal capital market where the internally generated cash f lows can be pooled,diversified firms can allocate resources to their best use~e.g.,see Li and Li~1996!, Matsusaka and Nanda~1997!,Stein~1997!,Weston~1970!,and Williamson ~1975!!.2Clearly,these models do not explain the misallocation of resources to divisions with poor opportunities.Agency cost models have sometimes been offered as explanations for the potential investment distortions in diversified firms.Because top manage-ment in the diversified firm has greater opportunities to undertake projects, and potentially greater resources to do so if diversification relaxes con-straints imposed by imperfect external capital markets,it might overinvest1Also,the evidence on the value of diversification,as indicated by the stock price reaction to the decision to diversify,is decidedly mixed.Morck,Shleifer,and Vishny~1990!show that acquiring firms in the1980s experience negative returns when they announce unrelated ac-quisitions.John and Ofek~1995!find that announcement returns are greater when diversified firms in the late1980s announce asset sales that increase focus.By contrast,Schipper and Thompson~1983!document positive announcement period returns when conglomerates an-nounced acquisition programs in the1960s,and Matsusaka~1993!and Hubbard and Palia ~1999!find positive returns to announcements of diversifying acquisitions in the1960s and 1970s during the conglomerate merger wave.2Also see Billett and Mauer~1997!,Denis and Thothadri~1999!,Gertner,Scharfstein,and Stein~1994!,Milbourn and Thakor~1996!,and Harris and Raviv~1996,1997!for other recent papers on the costs,benefits,and workings of internal capital markets.The Cost of Diversity37 resources~e.g.,see Stulz~1990!and Matsusaka and Nanda~1997!!.Though we believe that agency theories could explain generic overinvestment—for example,the decision to diversify could be viewed as an attempt by the CEO to entrench herself~e.g.,Shleifer and Vishny~1989!!—it is more difficult to see how these theories could explain the internal misallocation of funds;the CEO should exploit all potential sources of value inside the firm,skimming her agency rents only from the overall pie.Inf luence cost models are a third class of models that attempt to explain the decisions of diversified firms.In Meyer,Milgrom,and Roberts~1992!, managers of divisions that have a bleak future have an incentive to attempt to inf luence the top management of the firm to channel resources in their direction.Of course,in the spirit of inf luence cost models,top management sees through these lobbying efforts.Thus,no resources are,in fact,misal-located to the divisions,though costs are incurred in lobbying activities.As a result,it is again hard to explain the evidence on misallocation with these models.3Since existing theories need substantial embellishment to explain the mis-allocation of funds in diversified firms and the cross-sectional variation in value,Occam’s Razor suggests a different approach.We develop a model of capital allocation under two basic assumptions.First,headquarters has lim-ited power over its divisions:it can redistribute resources ex ante,but it cannot commit to a future distribution of surplus.Second,surplus is distrib-uted among divisions through negotiations,and divisions can affect the share of surplus they receive through their choice of investment.4Questions of how the power to take decisions,or capture surplus,is distributed within the firm then become central to determining whether the firm does better or worse than the market.A brief description of our model may help fix ideas.We assume that the diversified firm consists of two divisions,each led by a divisional manager. Each manager starts with an endowment of resources that the headquarters can either transfer to the other division or leave in place.The retained re-sources can be invested in one of two projects:an“efficient”investment and a“defensive”investment.The former is the optimal investment for the firm in a world where all contracts can be perfectly enforced.The latter offers lower returns,but protects the investing division better against poaching by the other division.53Hard,though not impossible.The prospect of enhanced inf luence costs can lead to changes, ex ante,in real decisions like allocations or organizational structure.These ideas have been separately explored in Fulghieri and Hodrick~1997!,Scharfstein and Stein~1997!,and Wulf ~1997!.As we will argue later,the precise nature of the misallocation we document is hard to reconcile with inf luence cost models.4Our model is best characterized as a model of power-seeking,and is most related to papers by Shleifer and Vishny~1989!,Skaperdas~1992!,Hirshleifer~1995!,and Rajan and Zingales ~2000!.5That managers have a choice between investments that alter their power is well recognized in the literature;see Shleifer and Vishny~1989!and Stole and Zwiebel~1996!.38The Journal of FinanceDivisional managers have autonomy in choosing investments and are self interested.Even though the efficient investment maximizes firm value, a divisional manager may prefer the defensive investment that would ben-efit her more directly,especially when her resources and opportunities are much better than the other division’s.The reason is quite simple.Once the divisional manager makes the unprotected,albeit efficient,investment,she will have to share some of the surplus created with the other division.Of course,if the other division also makes the efficient investment,our man-ager will get a piece of the surplus created by the other division.If the surplus created by the other division is not too small relative to what she is giving up,the divisional manager will prefer the efficient investment. Thus appropriate incentives are created for both divisions only when they do not differ too much in the surplus—which is the product of resources and opportunities—they create.Diversity in resources and opportunities is costly for investment incentives.Clearly,the investment distortions would not arise if headquarters could design precise rules to share ex post surplus.In practice,sharing rules are likely to be determined by factors other than considerations of ex ante optimality—such as the ex post bargaining power of the divisions. Although headquarters cannot contract on how divisions will share the surplus ex post,it can transfer funds ex ante.Some transfers will certainly be made because one division has better opportunities than the other.If stand-alone divisions face imperfect capital markets and cannot borrow as much as they need,the transfers to deserving divisions~“winner-picking”in Stein’s~1997!felicitous language!is one way the diversified firm adds value.But transfers will also be made so as to improve the incentives to un-dertake the efficient investment.Since incentives are distorted away from the optimal because of diversity~of opportunities and resources!,transfers will be made in a direction that makes divisions less diverse—from divi-sions that are large and have good opportunities to divisions that are small and have poor investment opportunities.Thus,the diversified firm may misallocate some funds at the margin~relative to the first-best!to prevent greater average investment distortions.The more diverse a firm’s divisions are,the greater the need to reallocate funds in this way.Thus corporate redistribution may be a rational second-best attempt to head off a third-best outcome.We are not the first to argue that politics inf luences investment decisions in firms.6However,our simple model of internal capital allocation based on power considerations has the advantage of identifying a clear proxy for what6For example,Chandler~1966,p.166!describes the capital budgeting process at General Motors under Durand’s management in the following way:“When one of them@Division Man-agers#had a project why he would vote for his fellow members;if they would vote for his project,he would vote for theirs.It was a sort of horse trading.”The Cost of Diversity39 drives inefficient allocations:the diversity of investment opportunities and resources among the divisions of the firm.Moreover,it offers detailed test-able implications on the direction of f lows between divisions.We test the implications of the theory for a panel of diversified U.S.firms during the period1980to1993using the segment data on COMPUSTAT. Our theory suggests that whether a segment receives or makes transfers in a diversified firm depends not so much on its opportunities~proxied for by Tobin’s q)as on its size-weighted opportunities,and the way these are dis-persed across segments in that firm.We show that our theory has a greater ability to predict internal capital allocation than the Efficient Internal Mar-ket theory.Moreover,allocations toward the relatively low q segments of a diversified firm,on average,outweigh allocations to its relatively high q segments as the dispersion in weighted opportunities~which we call diver-sity!increases.Of course,this may simply ref lect the channeling of funds to low q seg-ments that are inefficiently being rationed by the market.For this reason, we test the relationship between diversity and value.We find the greater the diversity,the lower the diversified firm’s value relative to a portfolio of single-segment firms.This effect persists even after we correct for the ex-tent to which the diversified firm is focused in specific industries,so our measure of diversity captures something different from traditional measures of diversification.The empirical results,taken together,provide striking evidence that diver-sity in investment opportunities between segments within firms leads to dis-torted investment allocations and hence value differences between diversified firms.Diversified firms can trade at a premium if their diversity is low.As a case in point,General Electric,perhaps the most admired U.S.conglomerate, is at the8th percentile of our sample over the entire sample period in terms of diversity,and at the75th percentile in terms of relative value.More generally,we believe that our evidence sheds light on how decisions within firms can differ from decisions made in markets.A firm is a collec-tion of commonly held,and mutually specialized critical resources.7Though the common control of key resources gives certain agents in the firm the power to shape transactions that would otherwise not be possible in the marketplace~such as the transfer of resources!,the absence of a clear de-marcation to property rights within the firm can create inefficient power struggles~also see Rajan and Zingales~1998a!!.Thus,our finding that a measure of the distortions created by power~i.e.,diversity!relates to the discount diversified firms trade at suggests,first,that the use of power may indeed explain why transactions within firms are different from transac-tions in markets and,second,that neither hierarchies nor markets need dominate.Coase’s emphasis on power is far from empty!7See Kumar,Rajan,and Zingales~1999!for a more detailed exposition of Critical Resource theories of the firm.40The Journal of FinanceThe rest of the paper is organized as follows.In Section I we present the framework of our simple stripped-down model.In Section II we derive some testable implications from the model.Section III describes the sample,the tests,and the results.Conclusions follow.I.The ModelWe want to analyze resource allocation in diversified firms.Therefore,we focus on firms operating in different lines of business.For the purposes of our analysis,the distinction between vertically integrated divisions and un-related divisions is unimportant.In fact,the distortions we want to study may arise whenever different organizational units operate within the same hierarchy,so long as at least one dimension of their operations~e.g.,raising and allocating resources!is integrated.Our model,therefore,does not apply to a leveraged buyout fund,where each subunit is a firm that operates sep-arately from the other subunits on every dimension,including financing~see Jensen~1989!!.A.TimingConsider a world with four dates,0,1,2,and3.A firm is composed of two divisions,A and B,each of which is headed by a manager who,for simplicity, will be thought of as representing the entire human capital of her division. Each manager wants to maximize the surplus that accrues to her division at date2.We assume,by contrast,that headquarters maximizes the surplus created by the entire firm.8The two divisions interact on three dimensions.At date0,the headquar-ters can reallocate resources between the two divisions.At date1,divisions choose investments.The type of investment chosen affects the“property right”a division has on the cash f low produced because,depending on it,a division may have the opportunity to poach on the surplus created by the other division.At date2,the divisions split the total surplus according to their relative power.Everything is predetermined at date3:Production takes place and surplus is shared according to the date2contract.So date 3is only for completeness.To summarize,the sequence of events is pre-sented in Figure1.We now detail the interactions on the previous three dates.8In Rajan,Servaes,and Zingales~1997!,we model this more precisely by assuming that headquarters controls the physical assets of the firm~which are crucial for production!,and thus gets a share of the total surplus in bargaining with the divisions.If we assume that headquarters first bargains with the divisions after which the divisions further subdivide the surplus,headquarters will always get a constant share of the surplus,and hence has an in-centive to maximize the surplus created by the firm.The Cost of Diversity41Figure1.Timing of the events.B.Resources and TransfersEach division j starts with an initial endowment of resources,l0j,that can be invested.We assume that these resources include any potential borrow-ing from outside.The initial level of resources could also be thought of as the resources the division would be able to invest if it were a stand-alone firm. The quantity of these resources are assumed to be limited despite unlimited investment opportunities~see later!because external capital markets are imperfect.For simplicity,we assume that headquarters can transfer all of a divi-sion’s resources to the other,though we will see that in equilibrium it will not always choose to do so.The total resources division A has available for investment at date1is then l1Aϭl0AϪt,and division B has l1Bϭl0Bϩt.C.InvestmentEach division can allocate its date1resources,l1j,to one of two kinds of investments.One investment is technologically efficient in that it maximizes returns;however,it leaves the surplus exposed to potential expropriation by the other division.Alternatively,the division could make a defensive invest-ment,which protects the surplus created at the cost of lower returns. Some examples are useful to fix ideas.The protective investment could be overly specialized~as in Shleifer and Vishny~1989!!so that only the division knows how to run it.This prevents the project from ever being turned over to the other division.Moreover,the durable resources employed on the project, such as employees,would also become so specialized that they could never be poached by the other division.Of course,the excess specialization would reduce the returns of such a project relative to a more general investment that could be subject to interference by the other division.The protective investment could reduce a division’s dependence on the other division.One of the authors once worked in a commercial bank with three subunits.One subunit had leased dedicated long-distance telephone lines to connect its representatives in each of the bank’s branches.The lines were barely used and since the subunits shared space in the branches,it would have been a simple matter for the other subunits to share access to the lines and also connect their representatives.Rather than spending resources to42The Journal of Financeaugment the common usage of the existing lines~efficient!,the other sub-units decided to lease their own lines~protective!because they felt their dependence on the first subunit would compromise their ability to bargain over issues such as transfer prices for funds.The protective investment could be one that stays within the well-defined turf of a division,even though it is efficient for the division to venture out.Bertelsmann,the German conglomerate,had separate divi-sions for publishing and new media.The development of book sales through the Internet provided a wonderful opportunity to the book division,as well as a substantial threat to its existing business.Yet the book division ig-nored the opportunity,preferring to focus on book sales through traditional channels,which were clearly its protected turf,and ignoring the efficient Internet investment that could well become part of the new media divi-sion’s empire.9Let the gross return at date3per dollar invested in efficient investment at date1be a j.Since defensive investments are wasteful of resources,the gross return to them is then a jϪg,where g is a positive quantity.To tie our hands,we assume that there are no savings or diseconomies from joint production.We only assume that if two divisions are under common ownership,resources can be reshuff led between the two.As we shall show,this reshuff ling has a positive side~the possibility that re-sources can be reallocated to their highest value use as in Stein~1997!! and a negative side~that a division may distort its investment in order to obtain“property rights”in the surplus it creates!.Thus,both the benefits and costs of a diversified firm spring from the same source:the use of power rather than arm’s length contracts to govern transactions within the firm.D.ContractibilityAccounting controls can ensure that the funds transferred to a division are invested,but a division~and the headquarters!cannot contract on the type of investment that is to be made by the other division.Myers~1977!has a detailed discussion as to why it is difficult to contract on investment;the nature of the“right”physical investment is based on the division’s judgment about the state,which is hard to specify ex ante or verify ex post.Also,much of the investment may not be in physical assets but may enhance the divi-sion’s human capital which,again,is hard to contract upon.We also make another assumption that is standard in the incomplete con-tract literature~see Grossman and Hart~1986!!:The surplus that is to be produced at the final date cannot be contracted on before date2because the state will be realized then and the state-contingent surplus that will be pro-9See the survey in The Economist,November211998,p.10.The Cost of Diversity43 duced may be hard to specify up front.As shown by Hart and Moore~1999!, this incompleteness of long-term contracts can be rationalized in a world where all contracts can be renegotiated.At date2,however,after the uncertainty about the state that will prevail is resolved,it is possible to strike deals,after bargaining,over the division of date3cash f low.Date3is separated from date2only for expositional convenience,and these dates could be thought of as very close together so that the deals could be thought of as enforceable spot deals.E.Date2PayoffsA divisional manager who chooses the defensive investment ensures that the surplus his division creates is well protected against any actions by the other division.Moreover,since the investment does not consume all his time and resources,he can attempt to poach on the surplus created by the other division if the other division made the efficient,albeit unprotected, investment.Thus,if each divisional manager chooses the defensive investment,there is no room for power seeking inside the firm and each division will retain its product—that is,~a jϪg!l1j.If one divisional manager,say A,chooses the defensive investment and B does not,then A will have the opportunity of trying to grab some of B’s surplus.If A attempts such a grab,B can defend himself,but at substan-tially greater cost than if he had chosen the defensive investment up front. Specifically,a fraction of the surplus produced by B is dissipated in ex post jockeying for advantage.The payoff B gets is then~a BϪu!l1B where u.g. For simplicity,we assume that the surplus division A grabs is almost fully matched by its cost of poaching,and it gets~a AϪg!l1Aϩe where e is a small number.Finally,if both divisional managers choose the technologically efficient investment,both are fully involved in productive activity,and neither has the time to poach.Of course,knowing this,neither bothers to defend.Thus, when both divisions choose the efficient investment,dissipation will be avoided and we assume the total surplus~a A l1Aϩa B l1B!is split equally between the two divisions.10The assumption of equal split is not crucial.We will discuss the robustness of the result to changes in this assumption in Section II.D.1110That headquarters does not get any of the surplus is only for simplicity.None of our results would be changed if headquarters gets a constant fraction of the surplus because of its control of the firm’s physical assets~see footnote7!.11It is possible to formalize all this.For example,let poaching consume real resources.Skaper-das~1992!shows that when the opportunity cost of poaching is high,cooperation~i.e.,no poach-ing!is an equilibrium.When division A makes the defensive investment and division B does not,A’s opportunity cost of poaching is low since the defensive investment has low returns.By contrast,when A makes the efficient investment,the opportunity cost of poaching is high,and both divisions would be content not to poach.44The Journal of FinanceF.First BestIdeally,all the resources should be transferred to the division with the highest return a j.12This division should allocate all the resources to the efficient investment.As we will show,resources may not all be transferred to the division with the highest use for them because such a transfer can destroy the division’s incentive to make the efficient investment.In what follows,we will examine how transfers and allocations are distorted away from the first-best.II.Equilibrium ImplicationsGiven the anticipated payoffs from date2bargaining,at date1division j ~jʦA,B!has the incentive to make the efficient investment if division k is expected to do so,and1Ϫ@a j l1jϩa k l1k#Ն~a1jϪg!l1j.~1!2Since a similar inequality should hold for division k also,both divisions have the requisite incentives if1Ϫ@a j l1jϩa k l1k#ՆMax@~a1jϪg!l1j,~a1kϪg!l1k#.~2!2It is easily checked that this is a necessary and sufficient condition for the efficient investment to be an equilibrium at date1.Now let us effect a sim-ple change of variables so that b jϭa jϪg.Furthermore,without loss of generality,let b j l1jՆb k l1k.Then the right-hand side of inequality~2!sim-plifies to b j l1j and the whole expression can be rewritten asg~l1jϩl1k!Ն~b j l1jϪb k l1k!.~3!For a fixed total amount of resources,~l1Aϩl1B!,this inequality implies that the product of resources and potential returns cannot be too diverse across divisions.The intuition is straightforward.Division j~which is the division that can contribute the most to surplus in the following period!will choose the effi-cient investment only if division k contributes enough surplus to make it worthwhile.Division k will not be able to contribute enough if its resource-weighted opportunities,b k l1k,are small relative to j’s.If so,division j will not make the efficient investment,and neither will k.Therefore,too much diversity in potential contributions to the common pool will lead to a break-12Of course,in practice,returns will not be constant with scale.Some resources will be retained by the division with lower a j so as to undertake essential investments such as maintenance.。

本份文档包含：关于该选题的外文文献、文献综述一、外文文献标题: The effects of institutional ownership on the value and risk of diversifiedfirms 作者: Mohammad Jafarinejada, Surendranath R. Joryb, Thanh N. Ngoc, 期刊: International Review of Financial Ana lys is (Volume 40 2015): 207-219年份: 2015The effects of institutional ownership on the value and risk of diversified firmsAbstractWe study the link between institutional ownership and firms' diversification strategy, value and risk. Our sample includes US-listed firms with segment data from 1998 to 2012. We find that not a ll kinds of diversification are value-destroying; unlike industria lly-diversified firms, global single-segment firms are trading at a premium relative to their imputed va lue. The presence of institutional investors and the stability of their shareholdings positively influence the likelihood that a firm is diversified. The proportion (volatility) of institutional ownership is higher (lower) among diversified firms compared to domestic s ingle-segment firms. More importantly, the higher the proportions of institutional shareholdings, the higher the excess value of the diversified firm and the lower the firm idiosyncratic risk. Institutional ownership volatility, on the other hand, is inversely related to a firm excess value but positively related to its idiosyncratic risk. Thus, the presence of long-term stable institutional investors enhances the value of diversified firms. Our findings remain robust to various model specifications and estimation techniques. Ke yw or ds: Institutional ownership; Corporate diversification; Diversification discount;1.IntroductionThe effect of diversification on firm value continues to attract considerable research interest. There are two main types of diversification: product- and geographic diversification (Vachani, 1991 and Martin, 2008). Product diversification refers to the degree to which firms are involved in different industries (we refer to them asbusiness segments). Geographic diversification refers to the extent to which firms are involved in different countries (we refer to them as geographic segments). Bodnar, Tang, and Weintrop (1997) find that global diversification is associated with higher firm value. In contrast, Denis, Denis, and Yost (2002) find that diversification decreases firm value. Other studies that suggest that diversification adversely affects firm value include Berger and Ofek (1995), Fauver, Houston, and Naranjo (2004); a nd Kim and Mathur (2008).Corporate diversification is appealing to investors. Under the premise that corporations are better at diversification than shareholders, corporate diversification should lower shareholders' investment risk at a fraction of the cost incurred by individual investors (see Agmon and Lessard (1977); Doukas and Travlos (1988); Harris and Ravenscraft (1991);Sanders and Carpenter (1998)). However, the diversity of operations at conglomerate firms makes it harder for ordinary investors to monitor them (Fatemi, 1984), opening the possibility for management to pursue self-interest objectives at the expense of the shareholders (Palich, Cardinal, & Miller, 2000). Such agency problems will reduce shareholders' return on investment and/or increase their risk. As a consequence, if there is a group out there who is better at monitoring managers, it is better to follow their lead. Jensen and Meckling (1976),and Shleifer and Vishny (1986) suggest that large investors could well be that group. We propose to consider the contribution to firm value and risk brought about by such an important group of investors at diversified firms, i.e., institutional investors.Institutional investors —inc luding mutual funds, hedge funds, pension funds, banks and insurance companies —are leading players in the financial markets as well as the primary owners of US corporate equity (Gillan & Starks, 2000). Estimates of their shareholdings at US firms range from 35% in the 1980s and 60% in the 2000s to 66% by the end of 2010. Given the size of their equity investments, they tend to exert considerable pressure on management to create wealth for investors (see also, Shleifer and Vishny (1986)). Jarrell and Poulsen (1987), Brickley, Lease, and Smith (1988); Agrawal and Mandelker (1990) suggest a direct link between institutional investors and shareholders' wealth. Consequently, managers pay a lot of attention tomeet the financial targets set by these investors (Easley and O'hara, 1987, Kyle, 1985 and Clay, 2002). Actions taken by the investors tend to generate a lot of press and media attention, especially at large and diversified firms. Many institutional investors believe that diversified firms can generate more profit by restructuring their divis ions; examples include campaigns by investors demanding restructuring at big firms like PepsiCo, Sony, Timken, and McGraw-Hill.Do institutional investors —as effective monitors of firm performance —support diversification and add value to diversified firms by virtue of their presence? We attempt to answer the question and analyze the importance of two measures of institutional ownership on diversified firms' value and risk, i.e., the proportion of the shares held by the institutional investors (IOPr) and the institutional ownership volat ility (IOV). The first measure is extensively used in the literature, though mostly focused on domestic firms. An emerging literature on the effects of institutional ownership on firm value suggests that in addition to the proportion of shares held by investors, it is equally important to consider institutional ownership stability. They argue that not all institutional investors stay with a firm for the long-term. Some are short-term and would leave at the first s ign of trouble. E lyasiani and J ia (2010),and Ca lle n and Fa ng (2013)ar gue that ―stable‖institutiona l inves tor s are m ore incentivized to monitor target firms and improve shareholder welfare.To the extent that diversification destroys value while institutional investors add value, we test whether their presence at diversified firms adds value. We hypothesize that diversified firms w ith higher proportions of shares held by institutional investors(IOPr) and lower variability in the proportions (IOV) are associated with higher excess values. Similar ly, we posit that firm risk is inversely related to IOPr and positively related to IOV. Managers would be under scrutiny not to cripple the firm with non-value added diversifications when more shares are held by institutional investors (IOPr). Conversely, if a firm pursues the wrong type of diversification, then there is little reason for the investors to hold onto their shares. Thus, we should observe a higher volatility in institutional shareholdings (IOV) among this subgroup of firms.We examine the universe of firms listed in COMPUSTAT from 1998 to 2012. We break the universe of COMPUSTAT firms into four groups: (i) domestic single-segment firms (DS), (ii) domestic multi-segment firms (DM), (iii) global single-segment firms (GS) and (iv) global mult i-segment firms (GM). We find that unlike domestic firms, the trend is to go global, i.e., we observe a fall in the number of domestic firms and a rise in the number of global firms over time. We find that not all kinds of diversification are associated with negative excess values. As opposed to industrially-diversified firms, global single-segment firms trade at a premium relative to their matched domestic s ingle-segment firms. The idiosyncratic risk levels are l ower for diversif ied firms compared to domestic s ingle-segment firms.The proportion of shares held by institutional investors (IOPr) is higher and the volatility in those proportions (IOV) is lower at diversif ied firms compared to domestic single-segment firms. Using probit regressions, we find that the likelihood to diversify is pos itively associated with the proportion of shares held by institutional investors (IOPr) and inversely related to its volatility (IOV).Univariate analyses suggest the existence of a positive relationship between IOPr and firm's excess value and an inverse relationship between IOPr and firm's idiosyncratic risk. Conversely, IOV is inversely related to excess value and positively related to idiosyncratic risk. The evidence suggests that there exists a significant relationship between the presence of long-term stable institutional investors and the ability of diversified firms to create wealth.Consistent with the univariate findings, the coefficient of IOPr is positive and that of IOV is negative in panel f ixed-effect regressions of firms' excess values. The coefficients of DMand GM, representing domestic multi-segment firms and globally diversified multi-segment firms, respectively, are both negative and highly significant. On the other hand, globa l single segment (GS) firms are associated with higher excess values.In regressions of firms' idiosyncratic risk, the coefficients of IOV and IOPr are positive and negative, respectively, suggesting that firms with lower proportions of equity held by institutional investors and higher volatility in that proportion areperceived as riskier and carrying more idiosyncratic risk. Overall, the empirical evidence suggests that diversified firm value is linked to investors with considerable and stable shareholdings. Furthermore, the absence of stable, long-term institutional investors increases the idiosyncratic risk of diversified firms. Our empirical findings are robust to alternative control variables, various model specifications and estimation techniques.Beyond complementing and extending the literature on the diversification discount, this study also contributes to the emerging literature on the role of institutional ownership stability on firm governance and performance. To the bestof our knowledge, our study is the first to assess the impact of institutional ownership stability among diversified firms. We consider the effect of institutional investors in lessening the diversification discount. We also examine the link between institutional investors and firm risk. The remainder of the paper is organized as follows. Section 2 reviews the literature and formulates the hypotheses. Section 3presents the data. Section 4 presents the methods used. We present and discuss the findings in Section 5, and conclude the paper in the final section.2.Literature review and hypotheses developmentAt the firm leve l, institutional investors tend to resist counterproductive strategies while supporting beneficial ones, especially shareholder driven ones (Bethel and Liebeskind, 1993, Hill and Snell, 1988, Holderness and Sheehan, 1985 and Mikkelson and Ruback, 1991). They tend to lobby senior executives to implement restructuring strategies that are beneficial to all the shareholders (see also Bethel and L iebeskind (1993)). Attig et al. (2012)argue that long-term institutional investors have greater incentives and efficiencies —economies of scale in the collection and processing of corporate information —to engage in effective monitoring, which in turn mitigate the asymmetric information dilemma and a ssociated agency problems.Barclay, Holderness, and Pontiff (1993) find that investors va lue the skills and demands of block purchasers and that firm value increases follow ing a block trade.They document a high turnover in management following these trades and a decline in firm va lue when the block holders either fail to achieve control and/or face resistance from management. Navissi and Naiker (2006) find that shareholding by active institutional investors of up to 30% positively influences corporate value. Beyond30%, the ownership tends to reduce firm value, which suggests that there exists a non-linear relationship between the two. When these shareholders become too large, there exists a signif icant risk that they will join forces with management to safeguard their common interests at the expense of the other shareholders, especially minority/individual ones. The authors find that passive investors do not affect firm value. Cornett et a l. (2007) find that the percentages of institutional investor involvement in a firm, as well as their numbers, are associated with better operating cash flow returns. However, the findings only hold when the investors have no business relation w ith the firm; else there is no significant relationship between institutional investors and firm performance.In theory, a conglomerate firm with multiple business segments should trade at the same price as the sum of the individual segments as standalone businesses. Yet, the literature finds that this is rarely the case. This inequality is due to asymmetric information and agency conflicts along the lines explained by M yers (1984); Myers and Majluf (1984). However, recent studies on institutional ownership and stability suggest that institutional investors can help solve such problems. We study whether the involvement of institutional investors can turn the fortunes of diversified firms given the evidence of a diversification discount (Fauver et al., 2004, Jory & Ngo,2012).H1.There exists a positive relationship between diversified firms' value and the proportion of the shares held by institutional investors.Nonetheless, not all institutional investors are equally motivated to ensure the long-term well-being of a firm. There exist some investors with an interest in short-term trading, quick profits and turnaround. They are not w illing to incur long-term monitoring costs and are not interested in monitoring firm'smanagement. Callen and Fang (2013) review some scenarios suggestive of a short-term bias. In the first case, the cost of monitoring far exceeds the combined costs of selling the shares and investing in another company. Second, many institutional investors hold well-diversif ied portfolios that do not require them to monitor actively every company in their portfolio. Third, the benefits of short-term gains far exceed those of long-term investing. With their constant buying and selling, these investors cause a lot of variability/volatility in the proportion of shares held by them in the company. Thus, we hypothesize that for value creation, stable institutional investors are more desirable than transient ones.H2.There exists an inverse relationship between firm value and institutional ownership volatility.Institutional investors tend to be large ones buying signif icant stakes in the companies they invest. Given the size of their investments, they pay particular attention to the risk-taking activity at target firms, and they have sufficient influence to lobby senior executives to sway risk-taking decisions in their favor. We hypothesize that the presence of these investors would dissuade managers from taking excessive idiosyncratic risks —for instance, engaging in unrelated diversification abroad where the managers have little know ledge of, thus increasing the risks the firm faces.Institutional investors have their own stakeholders to satisfy —for instance, pension funds and insurance companies have to make regular payments to their subscribers — and they would resist changes that would disrupt those relationships. To the extent that their required return on investment is linked to changes in the value of the firm, they would withstand actions that would increase the variance of the firm returns and adversely affect its ability to pay dividend. This would also be true for institutional investors who have selected targets based on their current business strategies and are satisfied with the status quo; those who lack the expertise and/or incentives to monitor new ventures and risky undertakings; and, investors whose wealth is concentrated in the target company.There are two types of risks faced by a firm, i.e., market and idiosyncraticrisks.Management can more directly affect the latter. Thus, for the purpose of our study, we consider a firm's idiosyncratic risk. To minimize its impact on the value of their equity investment, we test the hypothesis that the presence of institutional investors helps to m inimize idiosyncratic risk.H3.There exists an inverse relationship between firm idiosyncratic risk and the proportion of shares held by institutional investors.Financial markets comprise investors and traders of different time horizons (Malagon, Moreno, & Rodriguez, 2015). Investors engaging in frequent trading are more interested in short- rather than long-term gains. They could lobby for makeshift corporate changes at the expense of changes that would have benefited all the shareholders in the long run. Their presence will a lso do little in alleviat ing the risks associated with misalignment of objectives, opportunistic behavior and earnings management at the investee firm and, consequently, accentuate the firm's idiosyncratic risk. Frequent trading in the shares of a firm — caused by short-term traders — will lead to an increase in the volatility of the proportions of shares held by its investors. Conversely, long-term investors — those who are more like ly to buy and hold and cause less volatility in the proportions of shares held by investors —are more incentivized to monitor firm activities and improve shareholder value. Thus, we test the hypothesis that there exists a positive association between the volatility in the p roportions of shares held by investors and a firm's idiosyncratic risk.H4.There exists a positive association between firm idiosyncratic risk and institutional ownership volatility.3.DataOur sample of firms is from the COMPUSTAT database and our sample period starts in 1998 and ends in 2012. We define a diversified firm as one that reports data on the industry and/or geographic segments in the COMPUSTAT segment data tapes. Similar to He (2009), we start the sample period in 1998 because the Financial Accounting Standards Board (FASB) issued SFAS 131 in 1997, which significantlyaffects the way businesses report segment data.Following, we exclude the follow ing firms from our sample: (i) firms with SIC codes 4900–4999 (i.e., utility firms) and 6000–6999 (i.e., financial firms) since they are heavily regulated; (ii) firm-year observations with segment sales less than $20 million; and (iii) firm-year observations where the difference between the total sales of all its segments and the reported total sales for the entire firm i s greater than 1%. We further obtain accounting and financial data from COMPUSTAT, ownership data from Thomson Financial and stock price data from the Center for Research in Security Prices (CRSP) databases. The Thomson Financial database reports institutional 13F common stock holdings and transactions. It includes common stock holdings and transactions of institutional money managers where holdings of the managing company /filer's level are as per the 13F filing itself. It covers all NYSE,AMEX, NASDAQ common stocks and includes all managers filing 13F reports w ith the SEC.We present the sample descriptives in Table 1. We break the sample into four groups as follows: domestic single-segment (DS, i.e., not diversified), domestic multi-segment (DM, i.e., industrially diversified only), global single-segment (GS, i.e., geographically diversified only) and global mult i-segment (GM, i.e., both industrially and geographically diversified). The trend is toward more globally diversif ied firms; from 18% in 1998, their proportion as a percentage of the entire sample increases to 33% by 2012. We have 53,481 firm-year observations obtained from 11,882 firmsdistributed as follows, 63% DS, 12% DM, 15% GSand 10% GM firms.4.Methodology4.1.Measuring excess valueTo explore the valuation consequences of diversification, we use the same measure of excess value as in Berger and Ofek (1995); and Bodnar et al. (1997). The excess value of firm i is calculated as the natural log of the ratio of the firm's market v alue to its imputed value.4.2.Measuring idiosyncratic riskTo compute a fir m's idios yncra tic risk we use the Fama and French,1992 and Fama and French, 1993 model and add the excess return on a world portfolio to the equation as follows (see also Stulz (1999)):5.Results5.1.Probit regressionsWe model a firm's propensity to diversify as a function of the characteristics of the firm, its industry, its macroeconomic environment and, more importantly, the institutional ownership variables of IOPr and IOV. Table 2 reports the probit estimates from two different models. Model (1) contains the IOPr variable while Model (2) c ontains both the IOPr and the IOVvariables.value of the coefficient representing the variable IOPr is positive and statistically significant. Conversely, the value of the coefficient IOV is negative and statistically signif icant. The margina l effects of IOPr and IOV are positive and negative,respectively. Thus, diversified firms are associated with higher proportions of institutional ownership and lower volatility in that ratio over time.We also find that the odds that a firm is diversified are positively associated to: firm size (ln(AT)), profitability (EBITS), being listed on a major US stock exchange (MAJOR), the number of diversified firms in the industry (NUMDIVF), the proportion of sales generated by diversified firms (PrINDS), and the number of M&As occurring in the industry (NUMA). Conversely, capital-intensive firms (CAPX), growth firms as measured by the Q ratio, as well as growth industries (INDUSTRYQ), growth in GDP (GDPGr) and the industry's dollar amount of deals (VOLMA) are inversely related to a firm's propensity to diversify.5.2.Excess value and idiosyncratic risk of diversified firmsWe present the mean and median excess values of industrially- (i.e., DM, GM) and geographically diversified (i.e., GS, GM) firms in Table 3. We compare the excess values to that of the sample of DS (i.e., domestic single-segment) firms and various portfolios comprising DS firms. More precisely and following Villalonga (2004), we calculate each firm's predicted probability to diversify using the probit model of Eq. For each diversified firm, we form a portfolio comprising domestic single-segment firms w ith probability values from the same quartile. Since we run two versions of theprobit model, we present our findings based on two portfolios of matched domestic single-segment firms (i.e., portfolios 1 and 2, respectively) for every diversified firm.The excess values of DM (mean of − 8.20% in Panel A) and GM (mean of 16.20% in Panel C) firms are significantly lower than the corresponding values of both portfolios of matched domestic single-segment firms. Thus, industrial diversification is associated with lower excess values. Conversely, the excess values of global single segment firms (GS firms in Panel B) are positive and significantly higher than those of domestic single-segment firms. Our findings are consistent with Denis et a l. (2002), Kim and Mathur (2008); and Jory and Ngo (2012).We also compare the idiosyncratic risks of the four groups of firms. The idiosyncratic risk measures of the diversified firms (i.e, DM, GS and GM firms) are all significantly lower compared to either the sample of domestic single-segment firms or matching portfolios of domestic s ingle-segment firms. The combination of different business and/or geographic units leads to a portfolio effect that dampens the individual risk of each unit causing a diversified firm to report lower risk measures.5.3.The percentage of shares owned by institutional shareholders (IOPr) and the volatility of institutional ownership (IOV)We present the values of IOPr and IOV by diversification type in Table 4. We compare the figures with various subsamples of DM firms. The mean and median IOPr figures are 21% and 7%, respectively for domestic single-segment firms, i.e., non-diversified firms. In contrast, the proportion of company shares held by institutional investors is higher among diversified firms (both industria lly- and geographically-diversified firms). For instance, the mean values of IOPr at DM, GS and GM firms are 39%, 52% and 56%, respectively. The corresponding median figures are 38%, 57% and 64%, respectively. Thus, institutional investors hold a higher proportion of the shares at diversified firms when compared to non-diversified ones.6 ConclusionWhile single-segment domestic firms still dominate the corporate landscape, we observe a gradual decline in their numbers and an increase in the frequency ofglobally-diversified firms. We find that not all kinds of diversification are value-destroying and that global single-segment firms trade at a premium compared to matched domestic single-segment firms. Industrially-diversified firms though (either domestic or global) are associated with lower excess values. Nonetheless, the combination of the different business and/or geographic units exerts a portfolio effect that causes the overall enterprise risk to decline causing diversified firms to report lower risk measures compared to domestic single-segment firms.We provide empirical evidence that institutional ownership is a core value driver of diversified firms. They are associated with higher levels of institutional shareholdings and more stable shareholdings over time. The proportion and stability of institutional ownership are positively related to firm value and inversely related to its idiosyncratic risk. Our results indicate that the presence of long-term stable institutional investors is a source of value for diversified corporations.二、文献综述公司多元化经营文献综述摘要公司多元化经营的相关问题是近年来公司战略管理、产业经济学和公司金融领域的一个研究热点，也是一个在理论界颇具争议的话题。

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基金词汇中英对照 1效率前缘 Efficient Frontier高收益 High Yield基金公会 HKIFA基金经理 Fund Manager基金销售文件 Prospectus基准 Benchmarks被动式管理 Passive Management离岸基金 Offshore Fund最大跌幅 Maximum Drawdown揣测最佳时机 Market Timing期货管理型基金 Managed Futures短仓 /淡仓 Short Position跌势差 Downside Deviation雇主供款 Employer Contribution雇员供款 Employee Contribution新高价 High-On-High Basis新兴市场 Emerging Markets新兴市场基金 Emerging Markets Fund管理费 ManagemantFee增长和收入基金 Growthand Income Fund严格评估 Due Diligence买入价 Bid Price买卖差价 Bid-offer Spread传统基金 Traditional Fund债券基金 Bond Fund单一对冲基金 Single Strategy Hedge Fund单位 Unit单位信托基金 Unit Trust卖出价 Offer Price奖励费 Incentive Fees对冲 Hedge对冲基金 Hedge Fund对冲基金的基金 Fund Of Hedge Funds (FoHFs) 对冲基金指引 Hedge Funds Guidelines开放式基金 Open-end Fund强制性供款 Mandatory Contributions强积金 Mandatory Provident Fund Scheme-MPF 总回报 T otal Return标准差 Standard Deviation环球宏观 Macro Funds环球基金 Global Fund绝对回报 Absolute Return认可基金 Authorised Funds认沽期权 Put Option/Put认股权证基金 Warrant Fund认购期权 Call Option/Call证券借出 Stock Lending贝他系数 Beta资产分配 Asset Allocation资产净值 Net Asset value-NAV赎回 Redemption赎回通知期 Redemption Notice Period赎回费 Redemption Fee赎回费 / 买入费 Redemption Price / Bid Price 进取型的投资管理 Aggressive Growth进取型增长基金 Aggressive Growth Fund长 / 短仓持股 Long/Short Equity长仓 / 好仓 / 持货 Long Position预设回报率 Hurdle Rateh主动式管理 Active ManagementCalmar 比率 Calmar RatioSharpe比率 Sharpe RatioSortino比率 Sortino Ratio入息基金 Income Fund子基金 Baby Funds/Underlying Funds已调整风险回报 Risk-adjusted Return互惠基金 Mutual Fund公积金计划 Pension Plan分散投资 Diversification主要经纪 Prime Broker可换股债券套戥 Convertible Bond Arbitrage 另类投资 Alternative Investment市场中立 Market Neutral平均成本效益 Dollor-cost Averaging再投资 Reinvestment合并套戥 Merger Arbitrage地区基金 Regional Fund如计划为伞子基金 Umbrella Fund有限责任 Limited Liability自愿性供款 Voluntary Contributions行业/主题基金 Sector/Theme Fund价值型管理 value均衡基金 Balanced Funds投资年期 Time Horizon投资组合 Portfolio投资顾问 Investment Adviser杠杆 Leverage/Gearing杠杆借贷比率 Leverage Ratio每日估值 Daily Valuation每年回报 Annual Return供款 Contribution受压 / 濒临破产的' 证券 Distressed Securities定息工具套戥 Fixed Income Arbitrage定息基金 Fixed-income Fund承受风险能力 Risk T olerance注册地 Domicile沽空 Short Selling波幅 Volatility股份 Share股息分派 Dividened Distributions股票基金 Equity Fund表现费 Performance Fees阿尔法系数 Alpha非认可基金 Unauthorised Fund信托人 Trustee保本对冲基金 Capital Guaranteed Hedge Funds封闭式基金 Closed-end Fund界定利益计划 Defined Benefit Plan界定供款计划 Defined Contribution Plan相关系数 Correlation重大事件主导的投资 Event Driven/Special Situations 首次认购费 Front-end Fee基金词汇中英对照 2Efficient Frontier效率前缘High Yield高收益HKIFA基金公会Fund Manager基金经理Prospectus基金销售文件Benchmarks基准Passive Management 被动式管理Offshore Fund离岸基金Maximum Drawdown 最大跌幅Market Timing揣测最佳时机Managed Futures期货管理型基金Short Position短仓 /淡仓Downside Deviation 跌势差Employer Contribution 雇主供款Employee Contribution 雇员供款High-On-High Basis新高价Emerging Markets新兴市场Emerging Markets Fund新兴市场基金Managemant Fee管理费Growthand Income Fund 增长和收入基金Due Diligence严格评估Bid Price买入价Bid-offer Spread买卖差价Traditional Fund传统基金Bond Fund债券基金Single Strategy Hedge Fund 单一对冲基金Unit单位Unit Trust单位信托基金Offer Price卖出价Incentive Fees奖励费Hedge对冲Hedge Fund对冲基金Fund Of Hedge Funds (FoHFs)对冲基金的基金Hedge Funds Guidelines对冲基金指引Open-end Fund开放式基金Mandatory Contributions强制性供款Mandatory Provident Fund Scheme-MPF 强积金Total Return总回报Standard Deviation标准差Black-Scholes毕苏期权定价模式Macro Funds环球宏观Global Fund环球基金Absolute Return绝对回报Authorised Funds认可基金Put Option/Put认沽期权Warrant Fund认股权证基金Call Option/Call认购期权Stock Lending证券借出Beta贝他系数Asset Allocation资产分配Net Asset value-NAV资产净值Redemption赎回Redemption Notice Period 赎回通知期Redempti。

Enterprise life cycle and the enterprise culture choiceN.J:Prentice Hall Journal of Management,2003,(17):191-211.In the 1980s, the American management experts Iraq chuck? Adizes' (IChakAdizes) put forward enterprise dr life-cycle theory, it follows the same with biological enterprise "life cycle" rule, will experience a from birth, growth to aging until death life. Figures show that, 1970 among the fortune global 500 list to 1983, the enterprise should have 1/3 has been extinguished. This list from the enterprise production to decay, average life expectancy is only 40 ~ 50 years old. In Japan and Europe, enterprise's average life cycle of 125 years. In the United States, the enterprise average 62 less than 5 years the life cycle, live can over 20 years of enterprise accounts for only the total enterprises, only two of the 10 businesses can live for 50 years, but the average life expectancy of Chinese enterprises only 7 ~ 8 years old, especially private enterprise, not only average life expectancy is only 2.9 years old, and survival over five years less than 9, more than 8 years of less than 3. Those who once famous enterprise: for this reason, giants, more... After all the brilliance of swamp in acme off bright-coloured, a flash in the pan.Why so many enterprise life cycle is so short? Why then another some enterprise has undergone several hundred years still inheritance evergreen? Scholars have different explain this. Some people think that is the difference, others industrial explanation operational modes for different, still some people find reasons from management system, some people think that entrepreneurs of the pros and cons. Although these claims have certain truth, but seem to have involved in the root of the problem, did not find the enterprise decision. The real reason for heritage evergreen.With the emergence of enterprise culture theory and the unceasing development, the enterprise culture ", "Z theory", "seek advantages", "Japanese enterprise management art" four books published monographs, caused the enterprise culture research upsurge. Enterprise more and more aware of the organizational culture and regulating the important significance of organizational development, more and more profound understanding to an excellent organizational culture on enterprise long-term business and enterprise development plays a potential yet crucial role.Rand corporation, the international management consulting firm McKinsey study found the company, all the achievements are great, the role of enterprise culture is very obvious. Excellent enterprise culture is the world's 500 to the foundation of success. The fundamental causes of longevity and outstanding, is the constant innovation enterprise culture, and maintain its advanced nature. World famous longevity companies have a common feature, which they have a persistent core values, has its unique, enrich and excellent enterprise culture. Enterprise culture is a kind of strength, with the development of knowledge economy, it to enterprise's prosperity and decline will play more and more important role, even the decisive role. Can say, the 21st century enterprise competition between enterprises is the fundamental culture of competition. Who has strength in culture, who has competitive advantage, benefit advantages and development advantage.Although enterprise culture theory is mature and perfect,widely enterprise accepted and us ed.A large enterprise with excellent enterprise culture in the market competition tide the invinci ble position.But,on the other hand is countless companies looking for suits own enterprise cultu re.And some company,because enterprise life cycle and the change of environment,the original enterprise culture has not suitable for enterprise growth,even discourages enterprise from the shackles of sustainable development.Therefore,how to choose conform to the enterprise develo pment needs of the enterprise culture,according to the environment and life cycle changes appr opriate choice of enterprise culture,become a relationship between all enterprises are facing the prosperity of the enterprise major issue.The author thinks that,with inner and outer environment analysis enterprise handhold to gr asp different life cycle,the main contradiction,through the enterprise principal contradiction to c hoose the enterprise culture,is the enterprise culture is the only choice.The marxist handhold the contradiction that things,the law of the unity of opposites laws,is the most fundamental materialist dialectics of rules.The self-contradict reveals the essential contents of the associations with things development intrinsic po wer,is our most basic methods of knowledge.In the enterprise internal,always don't exist countl ess contradiction,these contradictions unceasing development and transformation,formed the e nterprise life cycle goes forward.Contradiction is the enterprise life cycle motivation,the evolutio n of the enterprise life cycle is contradictory results of progressive struggle.On the other hand,e nterprise's various contradictions with enterprise's prosperity and decline success or failure too cl osely.Due to the contradictory nature of the complexity of status,and conditions,the solution of the problem varied also.Only found the right solution,solve the contradictions of the principal co ntradiction,enterprise can unceasingly develop,eventually inheritance evergreen.Different life cycles,each stage the enterprise internal conflict,interest is different,the facin g problems and pressure is different,the main inconsistencies also vary wildly,therefore enterpri se have different also,must choose match different enterprise culture.But because enterprise lif e cycle,each phase of the inherent regularity of enterprise culture of normal performance has ge nerality,although as a means of implement cultural kernel with manifestation can vary,but as the core value orientation and management style still have rules.The life cycle analysis of enterprise pointed out the different stages of the main contradiction formation,conversion and integration,and explains the different stages the features of enterprise culture,thus for enterpris e culture choice the establishment of complete pattern laid a foundation.Enterprise culture choice must follow some principles,can correctly development and imple mentation.There are usually has the following four principles:enterprise life cycle associated wit h enterprise culture choice of principle,the enterprise culture selection and enterprise strategic i nterrelated principle,universality and individuality,carry forward the principle of combining the t radition and the principle of combining the development innovation.Because enterprise life cycle changes is a long-term incremental process,in order to guarantee the enterprise culture choice of maneuverability, achieve successful culture choice,therefore,it is necessary to find some specific timing.Choose t he things change timing reflects the degree.There is a clear changes in the enterprise,mainly in t he enterprise's survival and development of external politics,economy,culture,science and tech nology,and environment that significant changes have occurred,the enterprise quantitative chan ge to qualitative changes conversion,thus mastered the degrees,is something the best timing ch oice of enterprise ually have the following three time:enterprise business performanc e materially changes,enterprise management efficiency is low,the increased examing enterprise external environment materially changes.Enterprise culture choice is a systematic project,pinpoint the breakthrough,is the guarantee success choice.The author thinks that point of enterprise culture,choose from the enterprise,must present roughly as follows three based.Starting from the main contradiction,starting from th e enterprise the fine tradition of the major change,from the enterprise forward.Enterprise culture choice of content including spiritual culture,system culture,material cult ure choice.Enterprise culture spirit layer,system layer and physicality is inseparable,they influen ce each other,interaction,so in enterprise culture when the choice but also from grasping.Enterprise culture type selection is an important link of choice of enterprise culture.Enterpri se culture type varied,according to statistics,the existing scholars put forward about200species of cultural types.How in the dime found in the enterprise culture type suitable enterprise culture type,principal contradiction is a key.In the initial,enterprises are faced with the main contradiction weak strength.Exploration c ulture promotes cautious capital management and bold exploit the competition strategy,and is c haracterized by considering risk/benefit conversion between,clear enterprise this where action, be willing to accept change,dares to innovate,therefore appropriate strength weak start-ups make limited capital investment and a lot of new market development.Meanwhile,explorati on culture emphasize consider risk,advocate through careful explore avoid enterprise,its fickle in to various traps the character also suitable for enterprise flexible coping market risk.In growing up,the enterprise strength has achieved great growth,market share,but increas ed competition,looking around at the a inadvertent,easily lead to enterprise die young.The gro wth of this enterprise faster than the ascension of enterprise entrepreneurs ability,enterprise ma nagement level is low speed has become a major conflict.Often leads to low level management e nterprise decision makers and,on the other hand,even in a bad year successively on market dev elopment,on the other hand,often fall into trap or reckless expansion of diversification.Attackin g culture emphasize struggle and offensive spirit,take"simple foremost",in a variable system cha nges,measures,and continued to speed leap to winning,the first,win in attack.In addition,attac king culture also advocate the dovish,emphasize the orderly development of enterprise,against blind offense,avoid enterprise by hot heads blind investment.At maturity,enterprise management level abundant funds,mature,enterprise function prop erly.But because the enterprise system consummation,the enterprise leaders of the lesser,techn ical personnel and other reasons,the conservative enterprise innovation spirit gradually disappea r.At this time,transformational culture is to solve this principal contradiction best choice.Transfo rmational culture emphasize break existing pattern,praise highly technical innovation and thoug ht innovation,reform the previous system and hierarchy.Through the transformational cultural in tegration,mature can often heavy calls vitality and vigor.In a recession,the enterprise usually suffer from"big enterprise disease",management seri ous rigidity.At the same time,because of long time lost innovation and don't improve,so the pro ducts and technology seriously outdated,losing their competitive ually the enterprise or die,recession or change.Metamorphosis to type culture emphasize aggressive spirit of enterpris e layer,system layer,behavior level and physical comprehensive metamorphosis,through the bod y eliminate enterprise old abuses of reasonable advanced composition,reserves,to create an ent irely new enterprises.Because of the circumstance of the enterprise different,so we can't take some enterprise cu lture type derivative in one type of enterprise.True sense of enterprise culture type choice for ea ch enterprise,it would be the only.Other enterprise successful experience for reference,and can not copy only.Enterprise culture type of choice is more the core competitiveness,management concept,management concept,innovation consciousness choice,suitable for all firms enterprise c ulture type is not exist.Therefore,the enterprise culture type of choice is a dynamic and flexible working,which don't get bogged down in any form and rules,also cannot copy others successful experience.Enterprise culture selection process is a grey hazy set four states of the evolutionary process .In this process,the potential matching enterprise culture type of relevant information constantl y replenish and whiting,finally picked the most appropriate enterprise culture,this evolution cha racteristics based on enterprise life cycle determines the choice of enterprise culture is more tha n a stage decision-making process,gradual.The author put enterprise culture choice can be grouped into,featured, optimization,enterprise culture flexibility management four stages.The first stage:the ly,to many potential enterprise culture for fast filtering,d etermine the candidate goal evaluation.In this phase,the enterprise according to realize the spec ific situation in life cycle,main contradictions analysis to determine the enterprise to the problem s of the enterprise culture,and so as to determine the scope of domain with main the solution of the problem for the principle,according to enterprise culture type matching strategy for prelimin ary screening.Based on the main conflict resolution of potential enterprise culture search strateg y is the key to the stage.Second stage:the selection.According to the first phase of each candidate determined by th e nature of enterprise culture and the contradiction between solution oriented quantified compa re integratedly,further narrowing the scope of candidate enterprise culture.This one phase key li es in the life cycle according to specific principal contradiction,establishing enterprises with the e valuation index system and the characteristic of choice appraisal method.This phase is mainly ai med at specific index system,adopting effective algorithm to evaluate candidate enterprise cultur e,and the candidate with similar evaluation value filter of enterprise culture.Stage3:optimization.According to the life cycle,the main contradiction multi-objective optimization decision analysis,the enterprise culture to integrate different optimization ,finally discovers the optimal enterprise culture.Fourth step:elastic management enterprise culture.This one phase mainly is establishing th e enterprise culture management mechanism,according to the selected enterprise culture in ent erprise operations of the contribution and principal contradiction,the change of dynamic adjust ment to reduce because the opportunism behavior and damage and reduce the current enterpris e culture choice of opportunity cost.To the enterprise culture follow-up assessment and management is the emphasis.In the actual enterprise culture choice process,the enterprise culture choice of process and mode is vary.The author establish the four-stage model is usually sense the steps necessary to enterprise culture choice.In fact,a successful enterprise culture choice and innovation must be a long-term systematic project,must include the following aspects:seize enterprise life cycle and enterp rise principal contradiction this masterstroke,pinpoint opportunity and the breakthrough,deter mine the enterprise culture choice of content,with enterprise actual situation choose enterprise culture type,and according to the four-steps model selection of concrete steps,finally choosing and establish a good enterprise culture.企业生命周期与企业文化选择上个世纪八十年代，美国管理学家伊查克？爱迪思（IChakAdizes）博士提出了企业生命周期理论，认为企业同生物一样都遵从“生命周期”规律，都会经历一个从出生、成长到老化直至死亡的生命历程。

EXPLAINING THE DIVERSIFICATION DISCOUNTJose Manuel Campa Simi KediaStern School of Business Graduate School of Business AdministrationNew York University Harvard University44 West 4th Street Morgan Hall 483New York, NY 10012 Boston, MA 02163Phone: (212)998-0429Phone: (617)495-5057Email: jcampa@ Email: skedia@First Draft: November 1998Current Draft: September 2001ABSTRACTDiversified firms trade at a discount relative to similar single-segment firms. We argue in this paper that this observed discount is not per se evidence that diversification destroys value. Firms choose to diversify. Firm characteristics, which make firms diversify, might also cause them to be discounted. Not taking into account these firm characteristics might wrongly attribute the observed discount to diversification. Data from the Compustat Industry Segment File from 1978 to 1996 is used to select a sample of single segment and diversifying firms. We use three alternative econometric techniques to control for the endogeneity of the diversification decision. All three methods suggest the presence of self-selection in the decision to diversify and a negative correlation between firm's choice to diversify and firm value. The diversification discount always drops, and sometimes turns into a premium, when we control for the endogeneity of the diversification decision. We do a similar analysis in a sample of refocusing firms. Again, some evidence of self-selection by firms exists and we now find a positive correlation between firm's choice to refocus and firm value. These results consistently suggest the importance of taking the endogeneity of the diversification status into account, in analyzing its effect on firm value.We thank Philip Berger, Ben Esty, Stuart Gilson, Bill Greene, Charles Himmelberg, Kose John, Vojislav Maksimovic, Scott Mayfield, Richard Ruback, Henri Servaes Myles Shaver, Jeremy Stein, Emilio Venezian and seminar participants at Harvard Business School, 1999 Western Finance Association Meetings at Los Angeles, NBER Summer Conference in Corporate Finance, 2001 European Finance Association meetings at Barcelona, 2001 European Financial Management Association Meetings in Lugano, Cornell University, Georgetown University and Rutgers for helpful comments. We thank Chris Allen and Sarah Eriksen for help with the data. Simi Kedia gratefully acknowledges financial support from the Division of Research at Harvard Business School. All errors remain our responsibility.Firms choose to diversify. They choose to diversify when the benefits of diversification outweigh the costs of diversification and stay focused when they do not. The characteristics of firms that diversify, which make the benefits of diversification greater than the costs of diversification, may also cause firms to be discounted. A proper evaluation of the effect of diversification on firm value should take into account the firm-specific characteristics, which bear both on firm value and on the decision to diversify.Research by Lang and Stulz (1994), Berger and Ofek (1995) and Servaes (1996) show unambiguously that diversified firms trade at a discount relative to non-diversified firms in their industries. Other research confirms the existence of this discount on diversified firms and this result seems to be robust to different time periods and different countries.1 There is a growing consensus that the discount on diversified firms implies a destruction of value on account of diversification i.e. on account of firms operating in multiple divisions.This study shows that the failure to control for firm characteristics which lead firms to diversify and to be discounted, may wrongly attribute the discount to diversification instead of the underlying characteristics. For example, consider a firm facing technological change, which adversely affects its competitive advantage in its industry. This poorly performing firm will trade at a discount relative to other firms in the industry. Such a firm will also have lower opportunity costs of assigning its scarce resources in other industries, and this might lead it to diversify. If poorly performing firms tend to diversify, then not taking into account past performance and its effect on the decision to diversify will result in attributing the discount to diversification activity rather than to the poor performance of the firm.1 Servaes (1996) finds a discount for conglomerates during the 1960’s while Matsusaka (1993) documents gains to diversifying acquisitions in the late 1960's, in the United States. Lins and Servaes (1999) document a significant discount in Japan and UK, though none exists for Germany. The evidence from emerging economies is mixed. While Khanna and Palepu (1999), Fauver, Houston and Naranjo (1998) find little evidence of a diversificationAlso consider the case of a firm that possesses some unique organizational capability that it wants to exploit. Incomplete information may force this firm to enter into costly search through diversification to find industries with a match to its organizational capital. Matsusaka (1995) proposes a model in which a value maximizing firm forgoes the benefits of specialization to search for a better match. During the search period the market value of the firm will be lower than the value of a comparable single segment firm. Maksimovic and Philips (1998) also develop a model where the firm optimally chooses the number of segments in which it operates depending on its comparative advantage. Not taking into account firm characteristics, which make diversification optimal, in this case searching for a match, may again attribute the discount wrongly to value destruction arising from diversification.This does not imply that there are no agency costs associated with firms operating in multiple divisions. Consider the impact of cross sectional variation in private benefits of managers. A firm with a manager who has high private benefits will undertake activities, which are at conflict with shareholder value maximization. Such a firm will be discounted relative to other firms in its industry. Such a manager is also more likely to undertake value-destroying diversification. However, even in this case the observed discount on multi-segment years is partially accounted for by the ex ante discount at which the firm is trading, on account of high private benefits, before diversification. Not taking into account firm characteristics, in this case high agency costs, leads to an over estimation of the value destruction attributed to diversification.In this paper, we attempt to control for this endogeneity of firm’s decision to diversify in evaluating the effect of diversification on firm value. The arguments suggest that the decision todiscount in emerging markets, Lins and Servaes (1998) report a diversification discount in a sample of firms from seven emerging markets.diversify depends on the presence of some firm-specific characteristics that lead some firms to generate more value from diversification than others. Choice of organization structure should therefore be treated as an endogenous outcome that maximizes firm value, given a set of exogenous determinants of diversification i.e. the set of firms characteristics. Evaluating the impact of diversification on firm value therefore requires taking into account the endogeneity of the diversification decision.Controlling for the endogeneity of the diversification decision requires identifying variables that affect the decision to diversify while being uncorrelated with firm value. This becomes difficult as most variables that bear on the diversification decision also impact firm value. We build on the methodology of Berger and Ofek (1995) and the insights of Lang and Stulz (1994) to control for the endogeneity of the diversification decision. As Berger and Ofek (1995), we value firms relative to the median single segment firm in the industry. This measure has the advantage of being neutral to industry and time shocks that affect all firms in a similar way. However, Lang and Stulz (1994) show that industry characteristics are important in firm's decision to diversify.2 We explore the data for systematic industry differences among single-segment and diversifying firms that might help explain the decision to diversify.We first reproduce the results existing in the literature and identify a diversification discount in our sample. Preliminary data analysis shows that conglomerates differ from single segment firms in their underlying characteristics. We control for the endogeneity of the diversification decision in three ways. Firstly, we control for unobservable firm characteristics that affect the diversification decision by introducing fixed firm effects. Secondly, we model the firm's decision to diversify as a function of industry, firm and macroeconomic characteristics.We use the probability of diversifying as an instrument for the diversification status in evaluating the effect of multiple segment operations on firm value. Lastly, we model an endogenous self-selection model and use Heckman's correction to control for the self-selection bias induced on account of firm's choosing to diversify.The diversification discount always drops, and sometimes turns into a premium, when we control for the endogeneity of the diversification decision. The evidence in all three methods indicates that the discount on multiple segment firm-years is partly due to endogeneity. The coefficient of the correction for self-selection is negative, indicating that there is a negative correlation between a firm's choice to diversify and firm value. This supports the view that firm characteristics, which cause firms to diversify, also cause them to be discounted.Finally, we do a similar analysis in a sample of refocusing firms. Comment and Jarrell (1995), John and Ofek (1995) and Berger and Ofek (1996) document an increase in firm value associated with the decision to refocus. Much like the decision to diversify, the decision to refocus is also endogenous: Firms choose to refocus when the presence of firm-specific characteristics, make the benefits of refocusing greater than the costs of refocusing.3 Consider the case when changes in industry conditions generate higher than expected growth opportunities in one segment. This might increase the cost of an inefficient internal capital markets, increasing the cost of operating in multiple divisions and making refocusing optimal. In this case firm characteristics, which make the refocusing decision optimal, i.e. growth opportunities, also cause 2 Lang and Stulz (1994) find that firms that diversify tend to be in slow growing industries. They also report that diversified firms have lower Tobin's q than focused firms, but this difference was driven by differences among firms across industries rather than within an industry.3 In a static model, the above arguments would suggest that when the net benefit to operating in multiple segments is negative, the firm should immediately refocus. In practice, the decision to diversify and refocus involve large amounts of sunk and irreversible costs that lead to a lot of persistence in diversification status. There is yet, no clear understanding of the dynamic theory of firm's diversification status but one can draw an analog from recent theory on irreversible investment decisions (see Dixit and Pindyck (1994). This literature has emphasized that temporarythe firms to be more highly valued. Unlike the diversification decision, the refocusing decision is positively correlated with firm value. Not taking into account firm characteristics prior to refocusing, in this case growth opportunities, may erroneously attribute the associated premium to multi-segment operations of firms. This would lead to an underestimation of the discount associated with multi-segment operations prior to refocusing. Controlling for firm characteristics, which make the refocusing decision optimal, may further increase the discount associated with multi-segments operations of these firms. We document evidence in support of this view.The rest of the paper is organized as follows. In the next section we briefly discuss related literature. Section III describes the data, sample selection criteria and preliminary analysis. Section IV discusses the estimation methodology. Section V presents the evidence for diversifying firms and Section VI does the same for refocusing firms. Section VII concludes.II. RELATED LITERATUREThere is a vast and well-developed literature on the benefits and costs of diversification. The gains from diversification could arise from many sources. Gains to diversification arise from managerial economies of scale as proposed by Chandler (1977) and from increased debt capacity as argued by Lewellen (1971). Diversified firms also gain from more efficient resource allocation through internal capital markets. Weston (1970) argues that the larger internal capital markets in diversified firms help them allocate resources more efficiently. Stulz (1990) shows that larger internal capital markets help diversified firms reduce the under investment problem described by Myers (1977). Stein (1997) argues that the winner picking ability of headquartersshocks can have permanent effects due to hysteresis, which is consistent with an observed discount of multiple segment firms prior to refocusing.may allow internal capital markets in diversified firms to work more efficiently than external capital markets. Gains to diversification also arise from the ability of diversified firms to internalize market failures. Khanna and Palepu (1999) document gains to business group affiliation in India and emphasize the role of diversified groups in replicating the functions of institutions that are missing in emerging markets. Hadlock, Ryngaert and Thomas (1998) argue that diversified firms gain from a reduction of the adverse selection problem at the time of equity issues. Montgomery and Wernerfelt (1988), Matsusaka and Nanda (1994) and Bodnar, Tang and Weintrop (1998) propose gains to diversification based on the presence of firm specific assets, which can be exploited in other markets. Schoar (1999) finds that diversified firms are more productive than within their industry on average, though they still appear to be discounted.There are costs to diversification as well. The costs can arise from inefficient allocation of capital among divisions of a diversified firm. Stulz (1990) and Scharfstein (1998) show that diversified firms invest more than single segment firms in the poor lines of business or in businesses with low Tobin’s q. Lamont (1997) and Rajan, Servaes and Zingales (1997) also report evidence on inefficient allocation of capital within conglomerates. Meyer, Milgrom and Roberts (1992) make a related argument of cross subsidization of failing business segments. The difficulty of designing optimal incentive compensation for managers of diversified firms, also generate costs of multi-segment operations. Aron (1988, 1989), Rotemberg and Saloner (1994) and Hermalin and Katz (1994) show the greater difficulty of motivating managers in diversified firms in comparison to focused firms. Information asymmetries between central management and divisional managers will also lead to higher costs of operating in multiple segments, as has been shown by Myerson (1982) and Harris, Kriebel and Raviv (1982). Lastly, costs of operating in multiple segments could arise on account of increased incentive for rent seeking by managerswithin the firm (see Scharfstein and Stein (1997)) and opportunities for managers of firms with free cash flow to engage in value destroying investments (see Jensen (1986), (1988)). Denis, Denis and Sarin (1997) provide empirical evidence that agency costs are related to the diversification decision. They find that the level of diversification is negatively related to managerial ownership. Hyland (1999) examines firm characteristics including agency costs, and finds no support that agency costs explain the decision of firm’s to diversify.Our focus in the paper is not in identifying any of the above mentioned individual benefits and costs of diversification, but rather to concentrate on the net gain to diversification. Firms are likely to diversify when there are net gains to diversification and stay focused when there are net costs to diversifying. Most importantly for us the above research shows that the benefits and costs of diversification are related to firm-specific characteristics. We control for firm characteristics, which cause firms to diversify i.e. which generate a net gain to multi-segment operations, and isolate the net impact of the diversification decision.Our paper is not the first to take into account the endogeneity of the diversification decision. A growing theoretical literature has been modeling the decision to diversify as a value increasing strategy for the firm. Matsusaka (1995) develops a model in which the firm chooses to diversify when the gains from searching for a better organizational fit outweigh the costs of reduced specialization. Fluck and Lynch (1999) propose that diversification allows marginally profitable projects, which could not get financed as stand-alone entities, to get financed. Perold (1999) models the diversification decision in financial intermediaries and shows that diversification reduces firm’s deadweight costs of capital and so permits divisions to operate on a larger scale than stand-alone firms. Maksimovic and Philips (1998) also develop a model where the firm optimally chooses the number of segments in which it operates, depending on itscomparative advantage. They further show empirically that conglomerates allocate resources optimally, based on the relative efficiency of divisions.There has been other recent empirical work that provides evidences in support of the importance of selection bias and the endogeneity of the diversification decision. Chevalier (2000) finds that even prior to merging, diversifying firms display investment patterns that could be identified as cross subsidization. Whited (1999) finds that after controlling for the measurement problems in Tobins Q , there is no evidence of inefficient allocation of resources in diversified firms. Graham, Lemmon and Wolf (1999) propose that diversified firms are discounted because they acquire discounted firms and Villalonga (2000) finds that with a suitable benchmark the diversification discount diappears.III. DATA3.1 Sample SelectionThe sample consists of all firms with data reported on the Compustat Industry Segment database from 1978 to 1996. We follow the Berger and Ofek (1995) [from here on BO(95)] sample selection criteria and exclude from the sample years where firms report segments in financial sector (SIC 6000-6999), years with sales less than $20 million, years with a missing value of total capital and years in which the sum of segment sales deviated from total sales by more than 1%.4 Additionally, we also excluded years where the firm did not report four-digit SICs for all its segments. The final sample consists of 8,815 firms with a total of 58,965 firm years.3.2 Measure of Excess Value4 Years with segments in the financial services were excluded on account of the difficulty in valuing financial firms using multipliers. Years with sales less than 20 million dollars were excluded to prevent distortions caused by including very small firms.To examine whether diversification increases or decreases value, we use the excess value measure developed by BO (95), which compares a firm's value to its imputed value if each of its segments operated as single segment firms. Each segment of a multiple-segment firm is valued using median industry sales and asset multipliers of single segment firms. The imputed value of the firm is the sum of the segment values. Excess value is defined as the log of the ratio of firm value to imputed value. Negative excess value implies that the firm trades at a discount while positive excess values are indicative of a premium.53.3 Documenting the DiscountIn this section, we document the existence of a discount in line with prior work. We find that the median discount on multi-segment years is 10.9% (11.6%) using sales (asset) multipliers for the entire sample from 1978 to 1996 similar to the discount of 10.6% (16.2%) reported by BO (95) for the years 1986 to 1991. 6 We begin by estimating a model of excess value as specified by BO (95) so as to guarantee that any differences in the final results are not driven by differences in sample or methodology. They model excess value as a function of firm size,5 The imputed value of a segment is obtained by multiplying segment sales (asset) with the median sales (asset) multiplier of all single segment firm years in that SIC. The sales (asset) multipliers are the median value of the ratio of total capital over sales (assets). Total capital is the sum of market value of equity, long and short term debt and preferred stock. The industry definitions are based on the narrowest SIC grouping that includes at least 5 firms. Extreme excess values, where the natural log of the ratio of actual to imputed value is greater than 1.386 or less than –1.386, were excluded. The imputed value using sales multipliers of about 50% of all firms were based on matches at the four-digit SIC code, 26.5% were based on matches at the three-digit SIC code and 23.5% were based on matches at the two-digit or lower SIC code. The results using asset multipliers are similar. This is in line with the results reported in BO (95) of 44.6% matches at the four-digit level, 25.4% matches at the three-digit level and the 30% matches at the two-digit level or lower. See BO (95) for further details on methodology.6 For the years 1986 to 1991, we find that the median multiple segment discount in our sample is 7.6% (10.3%) using sales (asset) multiplier This difference with the BO (95) results is possibly on account of a difference in sample size. The number of firm years, in the period 1986 to 1991, in our sample is 17875 greater than 16181 reported by BO (95). There are 4565 firms in our sample as opposed to 3659 firms reported by BO (95). Our sample size is larger by 1142 (977) observations when using sales (asset) multiplier regressions. This increase in the sample size could arise on two accounts. Firstly, if firms restate their results such that they are no longer excluded due to one or more sample selection criteria, they might be included in our sample while not being included in BO (95) sample. Secondly, Compustat might add firms to the database along with the data for prior years. The largest category in this group (according to Compustat sources) consists of small firms which trade on OTC markets and are added when they change listing or on client request. Our overall sample, from 1978 to 1996, of 8815 firms andproxied by log of total assets, profitability (EBIT/SALES), investment (CAPX/SALES) and diversification, proxied by D, a dummy which takes the value 1 for years when the firm operates in multiple segments and zero otherwise. As seen in Table I, the coefficient of D is –0.13 (-0.12) and significant at the 1% (1%) level when sales (assets) multipliers are used. When we restrict the sample to the years 1986-1991, the coefficient of D is –0.12 (-0.13) using sales (asset) multipliers which is very close to the value of –0.144 (-0.127) reported by BO (95). The estimated discount in our sample is similar to that documented by BO (95).We test the robustness of the estimated discount to model specification by including lagged values of firm size, profitability and investment. Past profitability and investment may control for firm characteristics, which affect firm value. We also include log of total assets squared to control for the possibility of a non-linear effect of firm size on firm value. The coefficient of the square of firm size, is negative suggesting that the positive effect of firm size on excess value diminishes as firm size increases. We also include the ratio of long-term debt to total assets. The results reported in columns 3 and 6 of Table 1, show that the estimated discount is about 11% with both sales and asset multipliers. There is weak evidence that firm’s with high past profitability (high EBIT/SALES) and high past investments (high CAPX/SALES) are valued higher than the median single segment firm in the industry though the coefficients are not significant. Summarizing, multiple segment firms show a significant discount and this discount is robust to the inclusion of additional variables in the valuation equation. We report all results with this extended model. As a comparison, the results with the basic BO (95) model are similar and are discussed in Sections 5.5 and 6.5.3.4 Are multi-segment firms different?58965 observations is similar to the sample of 8467 firms and 58332 observations reported by Graham, Lemmon and Wolf (1999).In this section, we examine the characteristics of conglomerates, which might cause them to diversify. We also examine if conglomerates differ from single segment firms in their underlying characteristics.The 8,815 firms in our sample differ in their diversification profiles. The largest group consists of 5,387 single segment firms, which accounted for 30,284 firm years, as shown in Table II. The rest are firms which report operating in multiple segments at some point in the time period under consideration. These firms will be referred to as multiple segment firms or conglomerates in the paper. Among these multiple segment firms, there were broadly four kinds: Firms which diversify, those that refocus, those that do both and lastly conglomerate firms which do not change the number of segments in which they operate. The largest group consists of1,371 firms (13,133 firm years) which report both increasing and decreasing the number of segments in this time period. The next largest group consists of 873 firms (7,987 firm years) who refocused. There are 606 firms (4,326 firm years) which report diversifying in this period.7 Next we examine the characteristics of single segment and multiple segment firms years. Table III, reports average value of firm size, investment, profitability, leverage, research and development and industry growth rates for the different diversification profiles. Industry growth rate is the increase in industry sales, defined at the two-digit SIC level. SIC classification was obtained from the business segment data. Divisional sales for conglomerates were included in the respective SIC’s for the calculation of total industry sales.8Single segment years of conglomerates are significantly different from single segment firms in their characteristics. Single segment years of conglomerates are bigger, have higher7 Firms were classified using all available data i.e. the years excluded on account of sample selection criteria were also taken into account for the purpose of categorizing firms. This ensures that restructuring activity in years that were excluded from the sample is also taken into account.leverage and lower R&D than single segment firms. This is consistent with Hyland (1999) who finds that diversifying firms have lower research and development expenses. With regard to CAPX/SALES and EBIT/SALES, not only do single segment years of conglomerates differ from single segment firms, but they also differ significantly among them. Single segment years of diversified firms have higher CAPX/SALES and higher EBIT/SALES while single segment years of refocusing firms and firms which both refocus and diversify, have lower CAPX/SALES and lower EBIT/SALES than single segment firms. In summary, firm characteristics differ across single segment years in different diversification profiles.There are also significant differences in the characteristics of multi-segment years of conglomerates. Multiple segment years of diversifying firms tend to invest more in research and development (RND/SALES) than others. They also have higher capital investment(CAPX/SALES) and higher profitability (EBIT/SALES) than multiple segment years of refocusing firms and firms which both refocus and diversify. Conglomerates that do not change diversification status seem to be in mature industries with lower growth industries, have low research and development costs while enjoying a higher profitability (EBIT/SALES) and higher capital investment (CAPX/SALES). Multiple segment years of refocusing firms tend to have the lowest profitability and capital investment. This suggests that difference in characteristics of multiple segment years might be related to the choice of diversification strategy.Next we examine the characteristics of the discount over time and across the different diversification profiles. Table IVa documents the average annual discount from 1978 to 1996 estimated using sales and asset multipliers. There is substantial variation, with the median discount using sales multipliers being as low as –0.058 in 1982 and zero for years 1987 to 1991.8 Total industry sales is a function of firms entering and leaving Compustat, of restructuring activities of firms as well as accounting changes which cause firms to report sales in different SICs over the years. These growth rates。