Global Diversification, Industrial Diversification, and Firm Value

46 Pages Posted: 24 Oct 2000

See all articles by David J. Denis

David J. Denis

University of Pittsburgh

Diane K. Denis

University of Pittsburgh - Katz School of Business

Keven Yost

Auburn University - Department of Finance

Date Written: August 2001

Abstract

Using a sample of 44,288 firm-years over the period 1984-1997, we document an increase in both the incidence and the extent of global diversification over time. This trend does not, however, reflect a substitution of global for industrial diversification. We also find that global diversification results in average valuation discounts of approximately the same magnitude as those for industrial diversification. Analysis of the changes in excess value associated with changes in diversification reveals that increases in global diversification reduce excess value, while reductions in global diversification increase excess value. These findings are consistent with the view that the costs of global diversification outweigh the benefits.

Suggested Citation

Denis, David J. and Denis, Diane K. and Yost, Keven, Global Diversification, Industrial Diversification, and Firm Value (August 2001). Available at SSRN: https://ssrn.com/abstract=244721 or http://dx.doi.org/10.2139/ssrn.244721

David J. Denis (Contact Author)

University of Pittsburgh ( email )

Katz Graduate School of Business
Pittsburgh, PA 15260
United States
412-648-1708 (Phone)

Diane K. Denis

University of Pittsburgh - Katz School of Business ( email )

368B Mervis Hall
Pittsburgh, PA 15260
United States
412-624-0296 (Phone)

Keven Yost

Auburn University - Department of Finance ( email )

303 Lowder Hall
Auburn, AL 36849
United States
334-844-5303 (Phone)
334-844-4960 (Fax)

HOME PAGE: http://www.business.auburn.edu/~yostkev/

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