Does Geographic Dispersion Affect Firm Valuation?

38 Pages Posted: 22 Aug 2008

See all articles by Wenlian Gao

Wenlian Gao

Central University of Finance and Economics

Lilian Ng

Schulich School of Business, York University; European Corporate Governance Institute (ECGI)

Qinghai Wang

University of Central Florida - College of Business Administration

Date Written: August 20, 2008

Abstract

We find that the geographic dispersion of a corporation affects its firm valuation. Firms with subsidiaries located in different regions of the United States experience a valuation discount of 6.2% after controlling for the impact of both global and industrial diversifications. The valuation discount increases as firms expand their operations to different regions nationwide. Results show that firms with more anti-takeover provisions are more likely to be geographically diverse, and that these firms experience greater value discounts compared with their counterparts with fewer such provisions. Our overall evidence suggests that the geographic location of corporate activities is an essential component of corporate policies and has important market valuation implications.

Keywords: Geographic dispersion, Firm valuation, Corporate governance

JEL Classification: G30, G34

Suggested Citation

Gao, Wenlian and Ng, Lilian and Wang, Qinghai, Does Geographic Dispersion Affect Firm Valuation? (August 20, 2008). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1240962

Wenlian Gao (Contact Author)

Central University of Finance and Economics ( email )

39 South College Road
Beijing
China
62289220 (Phone)

Lilian Ng

Schulich School of Business, York University ( email )

N223, Seymour Schulich Building
4700 Keele Street
Toronto, Ontario ON M3J 1P3
Canada
+1.416.736.2100 x77994 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Qinghai Wang

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States

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