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

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

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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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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  11. Doukas, John & Travlos, Nickolaos G, 1988. " The Effect of Corporate Multinationalism on Shareholders' Wealth: Evidence from International Acquisitions," Journal of Finance, American Finance Association, vol. 43(5), pages 1161-75, December.
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  16. Caves, Richard E, 1971. "International Corporations: The Industrial Economics of Foreign Investment," Economica, London School of Economics and Political Science, vol. 38(149), pages 1-27, February.
  17. Brewer, H. L., 1981. "Investor Benefits from Corporate International Diversification," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 16(01), pages 113-126, March.
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  19. Linda Allen & Christos Pantzalis, 1996. "Valuation of the operating Flexibility of Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan, vol. 27(4), pages 633-653, December.
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