Does Geographic Dispersion Affect Firm Valuation?

38 Pages Posted: 25 Sep 2006

See all articles by Wenlian Gao

Wenlian Gao

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business

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 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, and the valuation discount increases as firms expand their operations to different regions nationwide. Results show that firms with weak corporate governance tend to expand geographically, and these firms experience greater value discounts compared with their counterparts with good corporate governance. Overall, our results suggest 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 2008). Available at SSRN: https://ssrn.com/abstract=932388 or http://dx.doi.org/10.2139/ssrn.932388

Wenlian Gao

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business ( email )

P.O. Box 742
3202 N. Maryland Ave.
Milwaukee, WI 53201-0742
United States
414-2292539 (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 (Contact Author)

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

PO Box 161400
Orlando, FL 32816
United States

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