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Inefficient Labor of Inefficient Capital? Corporate Diversification and Productivity Around the World

30 Pages Posted: 15 Sep 2009  

Todd Mitton

Brigham Young University - J. Willard and Alice S. Marriott School of Management

Date Written: September 15, 2009

Abstract

I study the relation between corporate diversification and labor productivity in a sample of over 600,000 firms from 89 countries. Across the entire sample, greater diversification is associated with significantly lower labor productivity. Contrary to theories emphasizing the inefficient use of labor in diversified firms, the negative relation between diversification and labor productivity is not stronger in countries with more-burdensome employment regulation. On the other hand, consistent with theories emphasizing the inefficient use of capital in diversified firms, the negative relation between diversification and productivity is significantly stronger in countries with better financial development.

Keywords: Corporate Diversification, Productivity, Financial Development, Employment Regulation

JEL Classification: G35, G34

Suggested Citation

Mitton, Todd, Inefficient Labor of Inefficient Capital? Corporate Diversification and Productivity Around the World (September 15, 2009). Available at SSRN: https://ssrn.com/abstract=1473896 or http://dx.doi.org/10.2139/ssrn.1473896

Todd Mitton (Contact Author)

Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )

Provo, UT 84602
United States
801-422-1763 (Phone)

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