Tobin's q, Corporate Diversification, and Firm Performance
AbstractIn this paper, the authors show that Tobin's q and firm diversification are negatively related throughout the 1980s. This negative relation holds for different diversification measures and when they control for other known determinants of q. Further, diversified firms have lower q's than comparable portfolios of pure-play firms. Firms that choose to diversify are poor performers relative to firms that do not but there is only weak evidence that they have lower q's than the average firm in their industry. The authors find no evidence supportive of the view that diversification provides firms with a valuable intangible asset. Copyright 1994 by University of Chicago Press.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Political Economy.
Volume (Year): 102 (1994)
Issue (Month): 6 (December)
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Other versions of this item:
- Larry H.P. Lang & Rene M. Stulz, 1993. "Tobin's Q, Corporate Diversification and Firm Performance," NBER Working Papers 4376, National Bureau of Economic Research, Inc.
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