Carsten Reimund, Bernhard Schwetzler

• Conglomerate discounts or premia are derived by comparing market values of conglomerates with the market values of a matched portfolio of stand alone firms (the imputed value of the conglomerates). Usually this comparison is based on firm values. We show that in this case conglomerate discounts or premia are subject to a potential bias caused by different cash holdings of conglomerates and stand alone firms. We prove evidence of such a cash distortion for German data: as German conglomerates hold on average substantially higher cash positions than the matched portfolio of stand alones, excess firm values are systematically upwards biased. Deducting cash from firm value and calculating discounts or premia based on enterprise values removes the bias. Based on excess enterprise values we are able to show a modest, but statistically significant conglomerate discount in Germany that is about 6% on an enterprise value basis._x000D_ A copy of this working paper can be obtained on account from the HHL Library. The price is EUR 5.00 within Germany and EUR 20.00 for international orders (including postage). Please send your order indicating the delivery address to: library(at)hhl.de.