Corporate Diversification and Financial Policy

This dissertation provides new evidence on the financial impact inherent to the conglomerate form of organization (corporate diversification) and the associated creation of internal capital markets. The first part of the dissertation examines the funding benefits of corporate diversification; one of the basic financing-related synergies associated with this sort of integration. The results suggest economically large and persistent financing advantages of diversified firms. As a central contribution, the chapter identifies causal effects in a shock-based research design using the introduction of new segment reporting standards as a quasi-natural experiment. The second part fills an important gap in the literature by illuminating the largely unexplored role of managerial human capital in internal capital budgeting. The analysis reveals a new perspective on internal capital market efficiency by showing that budgeting decisions strongly reflect what theorists have called “winner-picking”: superior managers receive substantially larger capital allocations compared to their less able peers. This evidence reconciles the apparent contradiction that conglomerate investment patterns usually deviate from the predictions of the neoclassical model. ... mehrWhile the focus of this dissertation is on examining the potential benefits associated with the conglomerate form of organization, the third part touches upon the ongoing debate on diversity and gender inclusion in organizations. The results of this part envision the importance of glass ceiling effects lower down the corporate hierarchy that prevent women from ascending the corporate ladder.