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Diversification, Organization, and Value of the Firm

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  • Tatsuo Ushijima

Abstract

Because corporate diversification and organization co-evolve, diversification discounts, which are widely reported in the literature, can be caused by organizational structure, rather than by the industrial scope of the firm. The paper examines this possibility based on a large sample of Japanese firms for which the legal (parent-subsidiary) structure of the organization is easily observable. I identified a significant discount for diversified firms with and without control over the organizational structure. I also found that firms with a legally segmented structure (e.g., holding companies) are deeply discounted. My results suggest that both diversification and organization are important determinants of firm value.
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Suggested Citation

  • Tatsuo Ushijima, 2016. "Diversification, Organization, and Value of the Firm," Financial Management, Financial Management Association International, vol. 45(2), pages 467-499, May.
  • Handle: RePEc:bla:finmgt:v:45:y:2016:i:2:p:467-499
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    Cited by:

    1. Tatsuo Ushijima, 2015. "Diversification Discount and Corporate Governance in Japan," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 11(3), pages 427-450, July.
    2. USHIJIMA Tatsuo, 2016. "Corporate Diversification, Employee Bargaining Power, and Wages," Discussion papers 16103, Research Institute of Economy, Trade and Industry (RIETI).
    3. MIYAJIMA Hideaki & OGAWA Ryo & USHIJIMA Tatsuo, 2017. "Are Smaller (Larger) Corporate Headquarters Better?," Discussion papers 17004, Research Institute of Economy, Trade and Industry (RIETI).

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