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The Valuation Discount of Diversified Firms in Australia


Grant Fleming


Continuity Capital Partners

Barry R. Oliver


Australian National University (ANU); Financial Research Network (FIRN)

Steven Skourakis


Deloitte Touche Tohmatsu
October 2001

ANU School of Finance and Applied Statistics, Working Paper No. 01-04

Abstract:     
This paper refines the Berger and Ofek (1995) methodology to estimate the valuation discount of diversified firms in Australia between 1988 and 1998. Mixed evidence is found for the diversification discount, with diversified firms trading at a discount to single segment firms using an earnings-based excess value measure and at a premium employing an assets excess value measure. Measurement errors are identified with the earning-based excess value measure and refinements are presented. Ordinary Least Squares (OLS) regression models are applied to explain the variations in the diversification results. There is strong evidence for differential pricing of diversified firms in Australia with higher performing diversified firms trading at a premium to single segment firms.

Number of Pages in PDF File: 27

Keywords: Ownership structure; Diversification

JEL Classification: G31

working papers series


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Date posted: August 13, 2001  

Suggested Citation

Fleming, Grant Alan, Oliver, Barry R. and Skourakis, Steven, The Valuation Discount of Diversified Firms in Australia (October 2001). ANU School of Finance and Applied Statistics, Working Paper No. 01-04. Available at SSRN: http://ssrn.com/abstract=279330 or http://dx.doi.org/10.2139/ssrn.279330

Contact Information

Grant Alan Fleming (Contact Author)
Continuity Capital Partners ( email )
GPO Box 314
Canberra, Australian Capital Territory 2601
Australia
Barry Ross Oliver
Australian National University (ANU) ( email )
Canberra, Australian Capital Territory
Australia

Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Steven Skourakis
Deloitte Touche Tohmatsu ( email )
Paramount Plaza
Midtown Manhattan
New York, NY AB
Australia
Feedback to SSRN (Beta)


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