Does corporate diversification create value in emerging markets? New evidence from Chile

Abstract

Using a sample of 85 Chilean firms listed in the Santiago Stock Exchange from 2005 to 2013, we analyze the  impact of corporate diversification on firm  value. We consider voting rights of the main shareholder and the institutional investors influence on firm value. We report firm-value destruction for diversified firms. Regarding ownership structure, we report a negative relation between the largest shareholder ownership and firm value. Separation between voting rights and cash flows rights of this shareholder is negatively related to firm value. AFP mitigate firm value destruction in diversified firms. Other  institutional investors  do  not play  an active  role  to control  value destruction. Finally, if the largest owner is a family, we report firm-value creation in diversified firms.