Both Sides of Corporate Diversification: The Value Impacts of Geographic and Industrial Diversification / Gordon M. Bodnar, Charles Tang, Joseph Weintrop.

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Bodnar, Gordon M

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w6224.Publication details: Cambridge, Mass. National Bureau of Economic Research 1997.Description: 1 online resource: illustrations (black and white)Subject(s):

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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.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w6224 (Browse shelf(Opens below))	Not For Loan

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October 1997.

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.