Work

Both Sides of Corporate Diversification: The Value Impacts of Geographic and Industrial Diversification

Year: 1997

Type: report

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.

Source: National Bureau of Economic Research

DOI: 10.3386/w6224

Authors: Gordon Bodnar, Charles Tang, Joseph Weintrop

Institutions: Johns Hopkins University, Johns Hopkins University School of Advanced International Studies, Pace University, Baruch College, City University of New York

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2104439770

Cites: 7

Cited by: 144

Related to: 10