Corporate diversification and firm value: a survey of recent literature

Stefan Erdorf, Thomas Hartmann-Wendels, Nicolas Heinrichs () and Michael Matz

Financial Markets and Portfolio Management, 2013, vol. 27, issue 2, 187-215

Abstract: 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. Copyright Swiss Society for Financial Market Research 2013

Keywords: Corporate diversification; Firm valuation; Internal capital markets; Discount; Premium; G11; G34; L25 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (18)

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DOI: 10.1007/s11408-013-0209-6

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