Diversification, Organization, and Value of the Firm

Tatsuo Ushijima

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Because corporate diversification and organization co-evolve, diversification discounts, which are widely reported in the literature, can be caused by organizational structure, rather than by the industrial scope of the firm. The paper examines this possibility based on a large sample of Japanese firms for which the legal (parent-subsidiary) structure of the organization is easily observable. I identified a significant discount for diversified firms with and without control over the organizational structure. I also found that firms with a legally segmented structure (e.g., holding companies) are deeply discounted. My results suggest that both diversification and organization are important determinants of firm value.

Pages: 49 pages
Date: 2015-02
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (1)

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Journal Article: Diversification, Organization, and Value of the Firm (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:15019

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