The Diversification Puzzle: Revisiting the Value Impact of Diversification for UK Firms |
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| Authors: | Edel Barnes Gael Hardie-Brown |
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| Affiliation: | The authors are from the Department of Accounting, Finance and Information Systems, University College Cork, Ireland. All errors and omissions remain the authors' sole responsibility. |
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| Abstract: | Abstract: The literature on value impact of diversification decisions has focused on US firms and has examined industrial rather than geographic diversification . This study exploits the Lang and Stulz (1994) , Berger and Ofek (1995) and Bodnar et al. (1999) methodologies and controls for form of diversification in assessing value impact for a sample of UK firms, for the period 1996-2000. Using an adjusted value metric that controls for industry effects, we report a significant and perverse geographic discount of 14%, and no systematic industrial value impact, suggesting that sector characteristics may be a significant driver of diversification choice for UK firms. |
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| Keywords: | diversification value impact internationalization industry risk |
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