Download or read book Effect of Multinational Diversification on Firm Value written by Protiti Dastidar and published by . This book was released on 2002 with total page 346 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This dissertation presents two essays that examine whether international diversification creates value. Each essay analyzes the issue from a distinct perspective using different methodologies. The dissertation extends the current literature by addressing several methodological limitations. The analysis addresses the confounding of international and industrial diversification by separately examining industrial, international, and multinational conglomerate diversification. It also addresses the inappropriate benchmarking by excluding internationally or industrially diversified firms from the benchmarks. The analysis accounts for the endogenous nature of the diversification decision. Finally, the sample is extended beyond the US.
Download or read book A Strategic Evaluation of the Effects of International Diversification on Firm Value written by Eve Hicks and published by . This book was released on 2000-01-01 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Strategic Business Fits and Corporate Acquisition Empirical Evidence written by Lois M. Shelton and published by Palala Press. This book was released on 2018-02-20 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work was reproduced from the original artifact, and remains as true to the original work as possible. Therefore, you will see the original copyright references, library stamps (as most of these works have been housed in our most important libraries around the world), and other notations in the work. This work is in the public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work. As a reproduction of a historical artifact, this work may contain missing or blurred pages, poor pictures, errant marks, etc. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.
Download or read book Valuation Effects of Global Diversification written by Amar Gande and published by . This book was released on 2012 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the effect of global diversification on firm value using a dataset of U.S. firms from 1994-2002. We document that global diversification enhances firm value. Specifically, we find Tobin's q, our proxy for firm value increases with foreign sales (measured as a fraction of the firm's total sales) even after we control for well-known determinants of firm value. In contrast, we find no such evidence for industrial diversification. We find evidence of both financial and real effects driving such a value enhancement from global diversification. Furthermore, we find that the valuation benefits from global diversification are higher if the firm diversifies into countries with creditor rights that are stronger than that of the United States. Our results are also robust to controlling for the firm's endogenous choice to diversify across countries or across industries. Our study is anchored by the theories of both the financial and real dimensions of global diversification, and our results support both theories. Overall, our results provide a unifying view that global diversification benefits are driven by both the real and financial dimensions.
Download or read book Why firms diversify written by Randall Morck and published by . This book was released on 1998 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Impact of Corporate Industrial and International Diversification on Firm Value written by Thomas-Reinhold Kreye and published by . This book was released on 2007 with total page 131 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Impact of Geographic Diversification on Firm Performance written by Young Sang Kim and published by . This book was released on 2008 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper empirically examines the economic effects of both corporate industrial and geographic diversifications. Using a sample of 28,050 firm year observations from 1990 to 1998, we find that industrial and geographic diversifications are associated with firm value decrease. Consistent with Denis et al. (2002), the costs of corporate diversification may outweigh the benefits of diversification. We find that geographically diversified firms have higher Ramp;D expenditures, advertising expenses, operating income, ROE and ROA than industrially diversified firms. In addition, higher Ramp;D expenditures create value for multi-segment global firms, but not for single segment global firms. This result implies that there exists an interaction effect between industrial and geographic diversification. We also examine the effects of agency cost issues, as characterized by the diversification discount, on both industrial and geographic diversification. Consistent with the agency explanation, firms with high equity-based compensation are associated with higher firm value than firms with low equity-based compensation. Also, we find that firms with a higher insider ownership percentage are associated with higher excess value.
Download or read book Global diversification industrial diversification and firm value written by David J. Denis and published by . This book was released on 1999 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Diversification Information Asymmetry Cost of Capital and Production Efficiency written by Yong Wang and published by . This book was released on 2008 with total page 189 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines how diversification changes firms' key characteristics, which consequently alter firms' value. The reason why I focus on this topic is because of the mixed findings in literature about the valuation effect of diversification. This study offers deeper insights to the influence of diversification on important valuation factors that are already identified in finance literature. Specifically, it examines if diversification affects firms' information asymmetry problem, firms' cost of capital and cash flow, and firms' production efficiency. The study looks at both the financial industry and non-financial industry and the chapters are arranged in the following order. Firstly, empirical studies show that investors do not value BHCs' pursuit of non-interest income generating activities and yet these activities have demonstrated a dramatic pace of growth in the recent decades. An interesting question is what factors drive the discontent of the investors with the diversification endeavors of the BHCs in non-interest income activities. The first chapter examines the subject from the view point of information opaqueness, which is unique in the banking industry in terms of its intensity. We propose that increased diversification into non-interest income activities deepens information asymmetry, making BHCs more opaque and curtailing their value, as a result. Two important results are obtained in support of this proposition. First, analysts' forecasts are less accurate and more dispersed for the BHCs with greater diversity of non-interest income activities, indicating that information asymmetry problem is more severe for these BHCs. Second, stock market reactions to earning announcements by these BHCs signaling new information to the market are larger, indicating that more information is revealed to the market by each announcement. These findings indicate that increased diversity of non-interest income activities is associated with more severe information asymmetry between insiders and outsiders and, hence, a lower valuation by shareholder. Secondly, since Lang and Stulz (1994) and Berger and Ofek (1995), corporate literature has taken the position that industrial diversification is associated with a firm value discount. However, the validity and the sources of the diversification discount are still highly debated. In particular, extant studies limit themselves to cash flow effects, totally overlooking the cost of capital as a factor determining firm value. Inspired by Lamont and Polk (2001), the second chapter examines how industrial and international diversification change the conglomerates' cost of capital (equity and debt), and thereby the firm value. Our empirical results, based on a sample of Russell 3000 firms over the 1998-2004 period, show that industrial (international) diversification is associated with a lower (higher) firm cost of capital. These findings also hold for firms fully financed with equity. In addition, international diversification is found to be associated with a lower operating cash flow while industrial diversification doesn't alter it. These results indicate that industrial (international) diversification is associated with firm value enhancement (destruction). Given the fact that the majority of the firms involved in industrial diversification also diversify internationally, failing to separate these two dimensions of diversification may result in mistakenly attributing the diversification discount to industrial diversification. Thirdly, financial conglomerates have been increasingly diversifying their business into banking, securities, and insurance activities, especially after the Gramm-Leach-Bliley Act (GLBA, 1999). The third chapter examines whether bank holding company (BHC) diversification is associated with improvement in production efficiency. By applying the data envelopment analysis (DEA), the Malmquist Index of productivity, and total factor productivity change as a decomposed factor of the index, are calculated for a sample of BHCs over the period 1997-2007. The following results are obtained. First, technical efficiency is negatively associated with activity diversification and the effect is primarily driven by BHCs that did not diversify through Section 20 subsidiaries before GLBA. Second, the degree of change in diversification over time does not affect the total factor productivity change but is negatively associated with technical efficiency change over time. This latter effect is also primarily shown on BHCs that did not have Section 20 subsidiaries before GLBA. Therefore, it can be concluded that diversification is on average associated with lower production efficiency of BHCs, especially those BHCs without first-mover advantage obtained through Section 20 subsidiaries. These chapters explores the possible channels through which diversification could alter firms' valuation. They contribute to the literature by offering further knowledge about the effect of diversification.
Download or read book Effects of Diversification and Market Power on Firm Value in the Asian Emerging Markets written by King-ha Thomas Wu and published by . This book was released on 2005 with total page 468 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Diversification Refocusing and Firm Value written by Gonul Colak and published by . This book was released on 2010 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: At any point in time a firm faces three restructuring choices: diversify, refocus, or do nothing. This study analyzes the causes and the consequences of these actions in a unified framework using the appropriate methodologies. Various factors, such as firm's characteristics and multinational nature, its industry's characteristics, its exchange and index inclusion, and divested (or acquired) segment(s)' industry conditions, are considered as the determinants of the diversifying and the refocusing decisions. The estimation results from the corresponding multinomial logit model suggest that refocusing occurs generally due to firm-specific reasons, and diversification due to outside factors, such as industry and economic conditions. Added or dropped segment's industry profitability, its relationship to the core business of the firm, and its relatedness to the businesses of the conglomerate's other segments have a nontrivial effect on either decision. In a related analysis, the paper explicitly models and estimates the valuation consequences that are sustained by the firm after it undertakes a refocusing or a diversification action. To isolate the changes in firm's value that are due to these decisions only, a 2SLS estimation is used to control for endogeneity that arises because the factors that affect a firm's value are likely to have also induced the firm to make the corresponding decision. The novelty of my approach is in its inclusion of variables measuring the consequences due to both actions, the diversification and the refocusing, in the same valuation equation. Contrary to some earlier findings, I find no evidence of 'diversification discount' or 'refocusing premium.' The choice of this paper to analyze all corporate restructuring decisions in a unified framework yields valuable business insights into the reasons for undertaking such corporate events.
Download or read book Corporate Diversification and Firm Value written by Stefan Erdorf and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We survey the recent literature on corporate diversification. How does corporate diversification influence firm value? Does it create or destroy value? Until the beginning of this century, the predominant thinking among researchers and practitioners was that corporate diversification leads to an average discount on firm value; however, several studies cast doubt on the diversification discount. In the last decade, there has been no clear consensus as to whether there is a discount or even a premium on firm value. Recent literature concludes that the effect on value differs from firm to firm and that corporate diversification alone does not drive the discount or premium; rather, the effect is heterogeneous across certain industry settings, economic conditions, and governance structures.
Download or read book Innovation Efficiency Global Diversification and Firm Value written by Wenlian Gao and published by . This book was released on 2014 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates whether multinational firms are less or more efficient in innovation activities than domestic firms. Using patents and citations scaled by R&D expenses and R&D capital as measures of innovation efficiency, we find that multinational firms have lower levels of innovation efficiency than purely domestic firms. This finding has been supported by additional evidence using peer pressure as an exogenous shock to firms' strategy of going internationalization. We also find that information asymmetry and the low cost of capital could be the major channels through which global diversification impacts innovation efficiency adversely.Our results further suggest that innovation efficiency is more valuable to multinational firms which mainly diversify into developed markets or markets with better patent protection.
Download or read book Internationalization and Firm Performance written by Mario Krist and published by Springer Science & Business Media. This book was released on 2009-07-25 with total page 275 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mario Krist explores if, how, and why internationalization and performance are related to each other and explicitly considers the role of intangible resources in this context.
Download or read book Diversification Refocusing and Economic Performance written by Constantinos Markides and published by MIT Press. This book was released on 1995 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work examines the causes and consequences of the "refocusing" phenomenon, where companies have stopped diversifying and begun focusing once more on their core product lines. Coverage includes a discussion of the effects of refocusing on market value, profitability and organizational structure.
Download or read book Essays on Firm Diversification written by Xuejing Xing and published by . This book was released on 2003 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation focuses on firm diversification. In particular, this dissertation investigates the valuation effects and the risk effects of corporate diversification. The dissertation consists of two essays. Essay 1, "The diversification discount and growth opportunities: Another look at the effect of corporate diversification on firm value," investigates whether corporate diversification reduces firm value. Previous studies establish a diversification discount by comparing business segments of diversified firms with stand-alone industry medians (means). However, business segments in diversified firms and the median (mean) stand-alone firms in the same industry may not be comparable because they may have different growth opportunities, which usually constitute a significant portion of firm value. Consequently, the observed diversification discount may result from the inappropriate use of benchmarks. In this essay, we use individual stand-alone industry firms of similar growth opportunities as benchmarks for business segments in diversified firms. Using a sample of 218 diversifying firms covering the period of 1994-2000, we find that when business segments in diversifying firms are compared with their stand-alone industry counterparts of comparable growth opportunities, the diversification discount still exists. We thus provide evidence suggesting that corporate diversification does destroy firm value, which is consistent with Lang and Stulz (1994), Berger and Ofek (1995, 1999), and Lamont and Polk (2002). Essay 2, "Does corporate diversification reduce firm risk? An empirical analysis," investigates whether corporate diversification reduces firm risk. While it has been argued and generally assumed that corporate diversification reduces firm risk, there is a paucity of empirical evidence concerning the association between corporate diversification and lower firm risk. Given the observed puzzles associated with corporate diversification, one should not take this association for granted without empirical evidence. In this essay, we empirically investigate the relationship between corporate diversification and firm risk using various risk measures including the variance of stock returns, systematic risk and firm-specific risk measures based both on the traditional single-factor market model and the Fama and French (1993) three-factor model, and time-varying risk estimates based on generalized autoregressive conditional heteroscedasticity (GARCH) estimations. Using a sample of 257 diversifying firms defined as firms that start with a single segment and then diversify at some point of time during the sample period of 1994-2000, we find that rather than reducing firm risk, corporate diversification typically increases the levels of firm risk, thereby rejecting the risk reduction hypothesis of firm diversification.
Download or read book The Effect of Diversification on Firm Performance in Emerging Markets written by Anqi Shi and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, diversification has become a common strategy used by companies in emerging markets. It is believed that diversification operations could help firms get better performance and gain higher profits from a larger internal market. However, contradictory results reveal that diversification empirically hurts firm value and other studies show the relationship between diversification and firm performance is complicated that should be studied in separate industries. The opinion is inconclusive on this topic. This study developed a performance index to see how diversification impact on various perspectives of firm performance. Conclusions as follow. International diversification has a positive correlation with firm performance in several aspects whereas industrial diversification helps firms' developing ability. However, due to the unavailability of long-term data, we can not rule out the possibility that well-performed firms go for international diversification. Besides, The relationship between diversification and firm performance affected by different industries. The agricultural and natural resource firms tend to exceed manufacturing firms in the efficiency aspects whereas manufacturing companies tend to have advantages in the sustainability aspect compared to service firms. There is also evidence showing that the largest shareholders' holdings rates have a positive impact on firm performance and state-owned rate has a negative relation with firm performance.
