The commonly accepted explanation in early studies to diversification discount is that diversification destroys value because of operational inefficiency. Such argument neglects the real options value incorporated in the value measures. It cannot explain why a firm diversifies if diversification...

This paper examines the determinants of the outcomes of the default recovery process. We find that a new variable that incorporates not only the percentage of debt more senior to the debt instrument, but also debt at the same rank, is the most important factor driving the recovery rate. It is...