Stefan Erdorf

Corporate Diversification and Dependence

Valuation of Multi-Business Firms and Basket Default Swaps

• Broschiertes Buch

Produktbeschreibung

For corporate management, the strategic decision between running a firm with multiple businesses or focusing on its core business is of fundamental importance. The question of whether corporate diversification creates or destroys value has attracted the attention of researchers and practitioners for quite some time. The author provides a comprehensive overview of the latest research on the corporate diversification effect on firm value and derives important findings for firm valuation. The well-established standard valuation models are often barely able to consider the peculiarities of multi-business firms, which often operate in various industries and have unique characteristics with respect to growth potential, cash flow dynamics and risk exposure, among other factors. The author presents a multi-business firm valuation approach which includes the effects of corporate diversification on firm value. The approach contains an explicit projection of the different characteristics for each business segment and considers segment-specific cash flows and capital costs, reflecting the differences in risk and growth characteristics across the different businesses in which a firm operates. The model also reflects diversification effects across the various phases of the business cycle, by considering asymmetric co-movements between businesses, which the author reveals in an empirical study. These diversification effects include cross-subsidization between business segments and risk reduction through debt co-insurance effect, as well as the impact on bankruptcy costs. The findings are useful for strategic business planning and the choice of M&A and private equity investments. The work is particularly relevant to decisions on optimal diversification strategy in business portfolio analysis and risk management.

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Produktdetails

• Finanzierung, Kapitalmarkt und Banken, Bd. 83
• Verlag: Eul, Josef, Verlag GmbH / Josef Eul Verlag GmbH
• Seitenzahl: 164
• Erscheinungstermin: 13. Juli 2012
• Englisch
• Abmessung: 210mm x 148mm x 11mm
• Gewicht: 247g
• ISBN-13: 9783844101638
• ISBN-10: 3844101632
• Artikelnr.: 36079252

Autorenporträt

Stefan Erdorf, born in Trier, Germany, studied Economical Mathematics at the University of Cologne. In 2012, he completed his doctoral studies as a stipendiary at the Graduate School of Risk Management in the Faculty of Management, Economics and Social Sciences at the University of Cologne, with the degree Dr. rer. pol. He has written articles on corporate strategy and diversification, firm valuation, as well as dependence modeling, and has presented on these subjects at several international conferences.

Inhaltsangabe

1. Introduction 1.1 Motivation and Research Questions 1.2 Outline of the
Dissertation 2. Corporate Diversification and Firm Value 2.1 Overview of
Main Theoretical Contributions 2.2 Empirical Evidence 2.3 Heterogeneous
Effect of Diversification Across Industries 2.4 Firm Value Across the
Business Cycle 2.5 Conclusion 3. Co-Movement of Revenue: Structural Changes
in the Business Cycle 3.1 Related Literature 3.2 Schemes of Industry and
Business Cycle Classification 3.3 Research Methodology 3.4 Empirical
Results 3.5 Conclusion 4. Valuation of Multi-Business Firms:
Diversification in a Stochastic Model 4.1 Valuation Approach 4.2
Illustrative Examples 4.3 Conclusion 5. Valuation of Basket Default Swaps:
Impact of Dependence Structures on Credit Spreads 5.1 Pricing Basket
Default Swaps 5.2 Modeling Dependence between the Default Times 5.3
Simulation Study 5.4 Conclusion 6. Summary and Conclusion