A diversified discount is a situation in which the stock price of a highly diversified firms is valued as less than the sum of their individual business units. The tendency for markets to value a diverse group of companies less than the total value of its components is known as a conglomerate discount.
When several divisions or businesses are not performing as well as the conglomerate as a whole, a conglomerate discount may be experienced. Comparatively to similar single-segment companies, diversified enterprises sell at a discount. In this study, we contend that the observed discount is not always proof that diversification reduces value.
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