Conglomerate Industry Spanning
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Abstract
| We use text-based analysis of business descriptions from 10-Ks filed with the SEC to examine in which industries conglomerates are most likely to operate and to understand conglomerate valuations. We find that conglomerates are most likely to operate in industry pairs that are closer together in the product space and in industry pairs that have profitable opportunities “between" them. Examining cross-sectional conglomerate valuations, we find that conglomerates that are more difficult to reconstruct using text-analysis of firm pure plays tend to trade at modest premia. The conglomerates that are most easy to replicate trade at small discounts relative to matched pure-play firms. These findings are consistent with conglomerate firms generating product synergies when producing in related profitable industries. |
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| Viorel Roscovan |
