tocomputethecostofcapitaleachyear,usingtheestimated
value of the firms each year.
11 L. Lang and R. Stulz, “Tobin’s Q, Corporate
Diversification,andFirmPerformance,”JournalofPolitical
Economy(1994): 1248–1280.
12 J.A.Doukas,M.Holmen,andN.G.Travlos,“Corporate
Diversification and Firm Performance: Evidence from
Swedish Acquisitions,” workingpaper, SSRN, 2001. They
lookedat 93 biddingfirmsinSwedenbetween 1980 and 1995
andtheyalsoreportthatoperatingperformancedeteriorates
after diversifying acquisitions.
13 S. Myers and N. Majluf, “Corporate Financing and
Investment Decisions When Firms Have Information That
InvestorsDoNotHave,”JournalofFinancialEconomics 13
(1984): 187–221.
14 W. G. Lewellen, “A Pure Financial Rationale for the
Conglomerate Merger,” Journal of Finance 26 (1971):
521–537.
15 H.Leland andJ.Skarabot,“Financial Synergiesand the
Optimal Scope of the Firm: Implications for Mergers,
Spinoffs, and Off-Balance SheetFinance,” working paper,
Haas School of Business, 2003.
16 R.C.Stapleton,“ANoteonDefaultRisk,Leverageandthe
MM Theorem,” Journal of Financial Economics 2 (1985):
377–381.