AN ANALYSIS OF THE DEGREE OF DIVERSIFICATION AND FIRM PERFORMANCE

Zheng-Feng Guo and Lingyan Cao

The International Journal of Business and Finance Research, 2012, vol. 6, issue 2, 53-58

Abstract: A firm's diversification decision is likely to be a response of two interacting effects, one is the agent problem and the other is the economies of scale. Whether diversification causes a discount or a premium depends on the interaction of the two effects. This paper re-evaluates the effect of diversification on firm performance by examining firms with different degrees of diversification. We found the evidence that the diversification premium gets smaller if a firm engages in more than three industries.

Keywords: Tobin’s Q; Firm performance; Diversification (search for similar items in EconPapers)
JEL-codes: G30 G34 L22 L25 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n2-2012/IJBFR-V6N2-2012-4.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ibf:ijbfre:v:6:y:2012:i:2:p:53-58

Access Statistics for this article

The International Journal of Business and Finance Research is currently edited by Terrance Jalbert

More articles in The International Journal of Business and Finance Research from The Institute for Business and Finance Research
Bibliographic data for series maintained by Mercedes Jalbert ( this e-mail address is bad, please contact ).