Large Diversification Research Articles

The Value of Diversification During the Conglomerate Merger Wave

ABSTRACTThe current trend toward corporate focus reverses the diversification trend of the late 1960s and early 1970s. This article examines the value of diversification when many corporations started to diversify. I find no evidence that diversified companies were valued at a premium over single segment firms during the 1960s and 1970s. On the contrary, there was a large diversification discount during the 1960s, but this discount declined to zero during the 1970s. Insider ownership was negatively related to diversification during the 1960s, but when the diversification discount declined, firms with high insider ownership were the first to diversify.

The Value of Diversification During the Conglomerate Merger Wave

The current trend toward corporate focus reverses the diversification trend of the late 1960s and early 1970s. This paper examines the value of diversification when many corporations started to diversify. I find no evidence that diversified companies were valued at a premium over single segment firms during the 1960s and 1970s. On the contrary, there was a large diversification discount during the 1960s, but this discount declined to zero during the 1970s. Insider ownership was negatively related to diversification during the 1960s, but when the diversification discount declined, firms with high insider ownership were the first to diversify.

Genetic diversity among wild and cultivated barley as revealed by RFLP

Genetic variability of cultivated and wild barley, Hordeum vulgare ssp. vulgare and spontaneum, respectively, was assessed by RFLP analysis. The material consisted of 13 European varietes, single-plant offspring lines of eight land races from Ethiopia and Nepal, and five accessions of ssp. spontaneum from Israel, Iran and Turkey. Seventeen out of twenty-one studied cDNA and gDNA probes distributed across all seven barley chromosomes revealed polymorphism when DNA was digested with one of four restriction enzymes. A tree based on genetic distances using frequencies of RFLP banding patterns was estimated and the barley lines clustered into five groups reflecting geographical origin. The geographical groups of land-race lines showed less intragroup variation than the geographical groups of spontaneum lines. The group of European varieties, representing large variation in agronomic traits, showed an intermediate level. The proportion of gene diversity residing among geographical groups (FST) varied from 0.19 to 0.94 (average 0.54) per RFLP pattern, indicating large diversification between geographical groups.

Margins and the safety of clearing houses

The major distinguishing feature of a futures market is the system of margining. In providing a guarantee, the clearing house bears the risk that price changes will exceed the initial margin, (a market risk), and that members will be unable to pay, (a credit risk). By bad judgement or management it is possible for clearing houses to fail, as happened in Hong Kong in 1987. This paper examines the capital required by clearing houses, using the International Commodities Clearing House in London as an example. Given the level of margining in 1987, it is found that exposure might exceed £40 million about once per year and £200 million once per thirty years. ICCH needs credit lines to cover these levels of exposure, plus enough capital to cover the proportion of these that are defaulted. These capital requirements are much smaller than they would be if only one market were being margined — there is a large diversification gain from clearing many futures markets. How the capital should be obtained — through shareholders' equity, by forming a mutual association, or by purchasing insurance — is discussed.