Product Market Uniqueness, Organizational Form and Stock Market Valuations
45 Pages Posted: 13 Oct 2012 Last revised: 1 Sep 2014
Date Written: August 31, 2014
We introduce a new framework for forming peer firm portfolios that can account for firm uniqueness and organizational form. Our new vocabulary-based peer firm portfolios explain much cross sectional dispersion in firm valuations and generate a direct measure of firm product market uniqueness. We find that firms have higher stock market valuations than their peers when their products are more unique. This result holds for conglomerate and focused single-segment organizational forms. Increased success in patenting, increased branding, and less venture capital financed entry into the firm's product space all contribute to the long-term maintenance of uniqueness and thus higher valuations.
Keywords: stock market valuations, organizational form, conglomerate firms, uniqueness
JEL Classification: D23, G31, G32
Suggested Citation: Suggested Citation