ISSN:
1468-5957
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Economics
Notes:
This paper estimates the effect of corporate diversification on market valuation and leverage. Using a data base which allows one to determine the product lines of companies on the 3-digit S.I.C. code level, a set of multi-industry firms was chosen. For each of these diversified firms, a portfolio of single industry firms was constructed which matched the component parts of the multi- industry firm. Tests showed that although diversified firms employ significantly greater financial leverage, their relative market value is significantly less than that of the matching portfolios of single industry firms with which they com- pete. This study does not support the view that corporate diversification creates synergistic benefits which can be translated into increased market value of the firm's securities.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/j.1468-5957.1985.tb00784.x
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