Cross-country evidence on the value of corporate industrial and international diversification |
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Authors: | Larry Fauver Joel F Houston Andy Naranjo |
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Institution: | a Department of Finance, University of Miami, Coral Gables, FL 33124-6552, USA;b Department of Finance, Insurance, and Real Estate, Warrington College of Business, University of Florida, Gainesville, FL 32611-7168, USA |
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Abstract: | We provide evidence on the value of industrial and international diversification for more than 3000 firms from Germany, the U.K., and the U.S. Consistent with prior studies, we find that industrial diversification reduces firm value in the U.K. and the U.S. Furthermore, similar to the recent findings of Denis et al. J. Finance 57 (2002)], we find that U.S. multinationals trade at a discount relative to firms operating only in the domestic market. This result is robust to different benchmarks used to measure the value of diversification. By contrast, we find that international diversification has no effect on the value of firms headquartered in either Germany or the U.K. |
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Keywords: | International diversification Corporate diversification Organizational structure Valuation benchmarks |
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