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

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Author Info

  • Bodnar, G.M.
  • Tang, C.
  • Weintrop, J.

Abstract

This paper examines the effect of both geographic and industrial diversification on firm value for a sample of over 20,000 firm-year observations of US corporations from 1987-1993. Our multivariate tests indicate the average value of a firm with international operations is 2.2% higher than a comparable domestic single-activity firm, while the average value of a firm with activities in multiple industrial segments is 5.4% lower than a protfolio of comparable domestic single-activity firms.

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Bibliographic Info

Paper provided by Wharton School - Weiss Center for International Financial Research in its series Weiss Center Working Papers with number 98-02.

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Length: 36 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:fth:pennif:98-02

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Keywords: GEOGRAPHY ; INDUSTRY ; CORPORATIONS;

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References

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  2. Gordon M. Bodnar & Joseph Weintrop, 1997. "The Valuation of the Foreign Income of U.S. Multinational Firms: A Growth Opportunities Perspective," NBER Working Papers 5904, National Bureau of Economic Research, Inc.
  3. Constatinos C Markides & Christopher D Ittner, 1994. "Shareholder Benefits from Corporate International Diversification: Evidence from U.S. International Acquisitions," Journal of International Business Studies, Palgrave Macmillan, vol. 25(2), pages 343-366, June.
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  8. repec:fth:michin:282 is not listed on IDEAS
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Citations

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Cited by:
  1. Campa, Jose M. & Kedia, Simi, 2000. "Explaining the diversification discount," IESE Research Papers D/424, IESE Business School.
  2. Bushman, Robert & Chen, Qi & Engel, Ellen & Smith, Abbie, 2004. "Financial accounting information, organizational complexity and corporate governance systems," Journal of Accounting and Economics, Elsevier, vol. 37(2), pages 167-201, June.
  3. Liang, Hsin-Yu & Ching, Yann Peng & Chan, Kam C., 2013. "Enhancing bank performance through branches or representative offices? Evidence from European banks," International Business Review, Elsevier, vol. 22(3), pages 495-508.
  4. Robert L Conn & Andy Cosh & Paul M Guest & Alan Hughes, 2003. "The Impact on U.K. Acquirers of Domestic, Cross-border, Public and Private Acquisitions," ESRC Centre for Business Research - Working Papers wp276, ESRC Centre for Business Research.
  5. Glaser, Markus & Müller, Sebastian, 2006. "Der Diversification Discount in Deutschland: Existiert ein Bewertungsabschlag für diversifizierte Unternehmen?," Sonderforschungsbereich 504 Publications 06-13, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  6. Júnior, José L. R., 2008. "What is the Value of Corporate Social Responsibility? An answer from Brazilian Sustainability Index," Insper Working Papers wpe_142, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  7. Eckert, Stefan & Dittfeld, Marcus & Muche, Thomas & Rässler, Susanne, 2010. "Does multinationality lead to value enhancement? An empirical examination of publicly listed corporations from Germany," International Business Review, Elsevier, vol. 19(6), pages 562-574, December.
  8. Laeven, Luc, 2001. "International evidence on the value of product and geographic diversity," Policy Research Working Paper Series 2729, The World Bank.
  9. Pablo A. Garcia‐Fuentes & Gustavo F. C. Ferreira & P. Lynn Kennedy, 2013. "Economic Performance of U.S. Multinational Agribusinesses: Foreign Direct Investment and Firm Strategy," Agribusiness, John Wiley & Sons, Ltd., vol. 29(2), pages 242-255, 03.
  10. Kevin Aretz & Söhnke M. Bartram, 2010. "Corporate Hedging And Shareholder Value," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 33(4), pages 317-371, December.
  11. Guo, Enyang & Keown, Arthur J. & Sen, Nilanjan, 2001. "The impact of firm diversification and focus: The Japanese experience," Pacific-Basin Finance Journal, Elsevier, vol. 9(3), pages 165-193, June.
  12. Campa, Jose M. & Chang, Kevin & Refalo, James F., 2000. "Options-based analysis of emerging market exchange rate expectations: Brazil's real plan, 1994-1999, An," IESE Research Papers D/425, IESE Business School.
  13. Elsas, Ralf & Hackethal, Andreas & Holzhäuser, Markus, 2010. "The anatomy of bank diversification," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1274-1287, June.
  14. Reid W. Click & Paul Harrison, 2000. "Does multinationality matter? Evidence of value destruction in U.S. multinational corporations," Finance and Economics Discussion Series 2000-21, Board of Governors of the Federal Reserve System (U.S.).
  15. Mike Peng & Andrew Delios, 2006. "What determines the scope of the firm over time and around the world? An Asia Pacific perspective," Asia Pacific Journal of Management, Springer, vol. 23(4), pages 385-405, December.
  16. Jory, Surendranath R. & Ngo, Thanh N., 2012. "The effect of foreign segment location on the geographical diversification discount," Global Finance Journal, Elsevier, vol. 23(2), pages 108-124.
  17. Mohamed Azzim Gulamhussen & Carlos Pinheiro & Alberto Franco Pozzolo, 2010. "Do multinational banks create or destroy economic value?," Mo.Fi.R. Working Papers 36, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  18. Fauver, Larry & Naranjo, Andy, 2010. "Derivative usage and firm value: The influence of agency costs and monitoring problems," Journal of Corporate Finance, Elsevier, vol. 16(5), pages 719-735, December.
  19. Cassiman, Bruno & Colombo, Massimo & Garrone, Paola & Veugelers, Reinhilde, 2003. "Impact of M&A on the R&D process. An empirical analysis of the role of technological and market relatedness, The," IESE Research Papers D/500, IESE Business School.

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