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The valuation discount of multi‐segment firms in Australia

Author

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  • Grant Fleming
  • Barry Oliver
  • Steven Skourakis

Abstract

This paper refines the Berger and Ofek (1995) methodology to estimate the valuation discount of multi‐segment firms in Australia between 1988 and 1998. Evidence is found that based on earnings before tax, the sample of multi‐segment firms traded at a 29 per cent greater discount than a comparable portfolio of single segment firms over the sample period. To explain the results further analysis shows that the valuation discount was driven by poorly performing multi‐segment firms rather than multi‐segment firms per se. This raises questions about studies that conclude that diversification is value destroying.

Suggested Citation

  • Grant Fleming & Barry Oliver & Steven Skourakis, 2003. "The valuation discount of multi‐segment firms in Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 43(2), pages 167-185, July.
    • Handle: RePEc:bla:acctfi:v:43:y:2003:i:2:p:167-185
    DOI: 10.1111/1467-629X.00087
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    Cited by:

    1. Robert W Faff & Stephen Gray & Kelvin Jui Keng Tan, 2016. "A contemporary view of corporate finance theory, empirical evidence and practice," Australian Journal of Management, Australian School of Business, vol. 41(4), pages 662-686, November.
    2. Dey, Tania & Banerjee, Rajabrata, 2011. "Can Corporate Diversification Promote Firm Value? A Survey," MPRA Paper 28928, University Library of Munich, Germany.
    3. Chongwoo Choe & Tania Dey & Vinod Mishra, 2014. "Corporate diversification, executive compensation and firm value: Evidence from Australia," Australian Journal of Management, Australian School of Business, vol. 39(3), pages 395-414, August.
    4. Joliet, Robert & Muller, Aline, 2013. "Capital structure effects of international expansion," Journal of Multinational Financial Management, Elsevier, vol. 23(5), pages 375-393.
    5. Elif AKBEN SELCUK, 2014. "Corporate Diversification, Group Affiliation and Firm Value: Evidence From Turkey," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 8(2), pages 151-174.
    6. Guang‐Zheng Chen & Edmund C. Keung, 2018. "Corporate diversification, institutional investors and internal control quality," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(3), pages 751-786, September.

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