TITLE

From diversification premium to diversification discount during institutional transitions

AUTHOR(S)
Lee, Keonbeom; Peng, Mike W.; Lee, Keun
PUB. DATE
January 2008
SOURCE
Journal of World Business;Jan2008, Vol. 43 Issue 1, p47
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
Abstract: Recent development of an institution-based theory of corporate diversification has uncovered a diversification premium in emerging economies, suggesting that some business group-affiliated companies may outperform competing firms not affiliated with business groups. Is the diversification premium found in emerging economies likely to hold over time? This article extends the institution-based theory by arguing that as institutional transitions unfold, diversification premium in emerging economies is likely to dissipate over time and eventually become a diversification discount. We empirically draw on a data set from South Korea between 1984 and 1996 involving 84 business groups and 751 group-affiliated and independent firms to substantiate this claim via a �chop shop� method. To the best of our knowledge, this represents the first study that documents the longitudinal process of how a diversification premium becomes a diversification discount during institutional transitions.
ACCESSION #
28405359

 

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