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Using simulated mergers to evaluate corporate diversification strategies

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  • Peter A. Silhan
  • Howard Thomas

Abstract

This study suggests that simulated mergers can be used to help evaluate the effects of diversification on corporate performance. The results, which are consistent with a risk‐reduction motive for conglomerate diversification, imply that conglomerate strategies focused on fewer and larger units may be advantageous in terms of certain measures of risk and return. Forecast error is used here to measure strategic risk, and return on equity is used to measure return.

Suggested Citation

  • Peter A. Silhan & Howard Thomas, 1986. "Using simulated mergers to evaluate corporate diversification strategies," Strategic Management Journal, Wiley Blackwell, vol. 7(6), pages 523-534, November.
    • Handle: RePEc:bla:stratm:v:7:y:1986:i:6:p:523-534
    DOI: 10.1002/smj.4250070604
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    Cited by:

    1. Silhan, Peter A., 2014. "Income smoothing from a Census X-12 perspective," Advances in accounting, Elsevier, vol. 30(1), pages 106-115.
    2. Yang Li & Yi-Kai Chen & Feng Sheng Chien & Wen Chih Lee & Yi Ching Hsu, 2016. "Study of optimal capital adequacy ratios," Journal of Productivity Analysis, Springer, vol. 45(3), pages 261-274, June.
    3. Palich, Leslie E. & Carini, Gary R. & Seaman, Samuel L., 2000. "The Impact of Internationalization on the Diversification-Performance Relationship: A Replication and Extension of Prior Research," Journal of Business Research, Elsevier, vol. 48(1), pages 43-54, April.
    4. Wang, Qian & Shen, Jianghua & Ngai, Eric W.T., 2023. "Does corporate diversification strategy affect stock price crash risk?," International Journal of Production Economics, Elsevier, vol. 258(C).

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