Recent literature has been largely negative in its assessment of value effects of corporate diversification. Does value maximization nevertheless play an important role in the conglomeration process? Drawing upon value maximization theories, we identify industry conditions that make a...

This paper presents a rationale for divestiture consistent with one of the frequently cited reasons by divesting firms, namely, that the firm is undervalued and splitting the firm into its component businesses will make it easier for the market to value the components accurately. When firms are...

This paper provides a model that explains the structure of mutual funds. Specifically, the paper explains why funds structure as open- or closed-end funds, and why some open-end funds charge loads. In our model fund managers generate earn excess returns that, on the margin, are increasing in...

This paper investigates the resource allocation decisions in conglomerates when managers are motivated by career concerns. The output of a conglomerate division is determined by the unknown ability of corporate management, the capital employed in the division, and intangible resources that the...

This paper investigates the resource allocation decision in conglomerates under moral hazard. We consider a firm where the input factors are unknown managerial ability that is common to all divisions, capital allocated to each division, and intangible resources that the manager allocates to each...