Diversification in Emerging Markets : The Case of Chilean Firms

This study is the first to analyze the effect on firm value of companies when they participate in the ownership of others companies in an emerging South American economy. For a sample of 83 non-financial Chilean companies traded in the 2005-2009 period, we find evidence of a discount for participate in ownership of other companies. However, this discount turns into a premium when participation in the ownership of another company results in control, especially in related sectors. In addition, we find a discount for unrelated corporate diversification similar to that found for other economies