Diversification Discount and its Causes: an Empirical Study

Diversified firms sell at a discount with respect to single-segment firms. However, there is dissent over its causes. A little researched possible cause is the survivorship bias. According to this hypothesis, low-value single segment firms disappear from the sample due to default more often than multi-segment ones. This thesis extends the empirical study of the diversification discount in Villalonga (2004) to a recent sample. Afterwards it investigates whether there is evidence in support of the survivorship bias.