Seminar Invitation-Thursday 11 May-Pedro Saffi

08-05-17 web.xrh 0 comment

The Department of Banking and Financial Management announces the upcoming seminar with Prof. Pedro Saffi, University of Cambridge

Pedro Saffi will present:

Short Sales Constraints and the Diversification Puzzle


Building on Miller’s (1977) short sales constraints insight, we construct a model showing that investors should disagree less about the valuation of a conglomerate than about the valuations of its individual divisions. Disagreement, combined with short sales constraints, increases asset prices and thereby implies a conglomerate discount. The model provides a wide variety of empirically testable implications about the incidence and size of the conglomerate discount. We test several of these predictions, and find that (i) conglomerates face fewer short sales constraints and have less dispersion of opinion than focused firms, and (ii) the conglomerate discount increases with short sales constraints and decreases with differences of opinion. While we are unable to fully explain the conglomerate discount through proxies of short sales constraints and differences of opinion, we find that they reduce its magnitude by between 50-70% using matched sample estimates.

Time and Place

May 11, 2017

Time: 16.15-18.00

Place: Room 01

More information about Pedro Saffi

More upcoming Seminars 2017:

May 18, 2017

Ilias Filippou, Warwick Business School