01982cas a2200265 a 4500 AALejournalIMF017700 230101c9999 xx r poo 0 0eng d 5.00 USD 9781484303764 1018-5941 BD-DhAAL BD-DhAAL Carvalho, Carlos. Extensive Margin Adjustment of Multi-Product Firm and Risk Diversification / Carlos Carvalho, Gee Hee Hong, Jing Zhou. Washington, D.C. : International Monetary Fund, 2017. 1 online resource (44 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students 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. Mode of access: Internet Hong, Gee Hee. Zhou, Jing. IMF Working Papers; Working Paper ; No. 2017/146 Full text available on IMF http://elibrary.imf.org/view/journals/001/2017/146/001.2017.issue-146-en.xml IMF e-Library