Extensive Margin Adjustment of Multi-Product Firm and Risk Diversification

Extensive Margin Adjustment of Multi-Product Firm and Risk Diversification
Author: Carlos Carvalho
Publisher: International Monetary Fund
Total Pages: 44
Release: 2017-06-30
Genre: Business & Economics
ISBN: 148430702X

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Product scope adjustment is a key mechanism through which multi-product firms achieve efficient resource allocations. In this paper, we take a novel perspective to study firms’ product scope adjustment behavior through the lens of asset pricing. Using a unique panel scanner data set containing detailed information on products, matched with the financial information of their manufacturers, we find that multi-product firms with higher product turnover have lower financial risks and lower risk premia. To understand this channel, we propose a stylized model with a time-dependent (Calvo-type) product turnover rate to highlight the ’risk absorption channel’ of product scope adjustment. In response to an economy-wide shock, a firm that can adjust its product scope more flexibly shows lower excess equity returns and lower asset volatility.


Extensive Margin Adjustment of Multi-Product Firm and Risk Diversification
Language: en
Pages: 44
Authors: Carlos Carvalho
Categories: Business & Economics
Type: BOOK - Published: 2017-06-30 - Publisher: International Monetary Fund

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Product scope adjustment is a key mechanism through which multi-product firms achieve efficient resource allocations. In this paper, we take a novel perspective
Extensive Margin Adjustment of Multi-Product Firm and Risk Diversification
Language: en
Pages: 44
Authors: Carlos Carvalho
Categories: Business & Economics
Type: BOOK - Published: 2017-06-30 - Publisher: International Monetary Fund

GET EBOOK

Product scope adjustment is a key mechanism through which multi-product firms achieve efficient resource allocations. In this paper, we take a novel perspective
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The Fall 2017 IMF Research Bulletin includes a Q&A article covering "Seven Questions on the Globalization of Farmland" by Christian Bogmans. The first research
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