Both Sides of Corporate Diversification: The Value Impacts of Geographic and Industrial Diversification
39 Pages Posted: 19 Jul 2000 Last revised: 6 Jul 2022
There are 2 versions of this paper
Both Sides of Corporate Diversification: The Value Impacts of Geographic and Industrial Diversification
Date Written: October 1997
Abstract
This paper examines the effect of geographic and industrial diversification on firm value for a sample of over 20,000 firm-year observations of U.S. corporations from 1987-1993. Our" multivariate tests indicate the average value of a firm with international operations is 2.2% higher than comparable domestic single activity firms, while the average value of a firm with activities in multiple industrial segments is 5.4% lower than a portfolio of comparable focused domestic firms in similar activities. More importantly, we demonstrate that failure to control simultaneously for both dimensions of diversification results in over-estimation of the negative value impact of industrial diversification, but has little impact on estimates of the positive value impact of geographic diversification.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Tobin's Q, Corporate Diversification and Firm Performance
By Larry H.p. Lang and René M. Stulz
-
The Cost of Diversity: The Diversification Discount and Inefficient Investment
By Raghuram G. Rajan, Henri Servaes, ...
-
The Cost of Diversity: The Diversification Discount and Inefficient Investment
By Raghuram G. Rajan, Henri Servaes, ...
-
Cash Flow and Investment: Evidence from Internal Capital Markets
-
The Dark Side of Internal Capital Markets: Divisional Rent-Seeking and Inefficient Investment
-
Internal Capital Markets and the Competition for Corporate Resources
-
Explaining the Diversification Discount
By José Manuel Campa and Simi Kedia
-
Explaining the Diversification Discount
By José Manuel Campa and Simi Kedia