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Proseminar Speaker – Arkadiy Sakhartov
December 13, 2017 @ 12:30 pm - 1:50 pm
STOCK MARKET UNDERVALUATION OF RESOURCE REDEPLOYABILITY
Arkadiy Sakhartov, Assistant Professor
University of Pennsylvania, Wharton School of Business
Strategic implications of stock market undervaluation of resources were often assumed in research. Such undervaluation let firms buy resources relatively cheaply, but it can also constrain resource deployment strategies. Despite the broad appeal to those implications in strategy research, their existence was refuted by market efficiency. This study develops a theoretical model that applies the conception of ambiguity aversion to valuation of the option for a firm to redeploy its resources to a new business. The model derives conditions under which stock markets undervalue resources. Those conditions enable empirical operationalization that is a more compelling response to the objection to strategic implications of stock market undervaluation of resources than simply speculating about such implications. Besides, the model provides a more complete account of resource redeployability.