CORPORATE DIVERSIFICATION, EXECUTIVE COMPENSATION, AND FIRM VALUE: EVIDENCE FROM AUSTRALIA

Chongwoo Choe, Tania Dey, Vinod Mishra and In-Uck Park

No 36-12, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: We estimate the effect of corporate diversification on firm value using a sample of 766 segment-year observations during 2004 – 2008 for firms listed on the Australian Stock Exchange as of August 2009. In addition to conventionally used measures of diversification, we develop five new measures of diversification that explicitly take into account the degree to which a multi-segment firm’s various segments are in related lines of business. In estimating the valuation effect of diversification, we use three excess value measures used by Lang and Stulz (1994) and Berger and Ofek (1995). We find that multi-segment firms in our sample enjoyed a significant diversification premium that ranges from 12.4% to 18% depending on the measures of diversification and excess value. We also find some evidence that multi-segment firms benefit more from diversification when their executives are motivated more through long-term incentives such as stock and stock options.

Keywords: Corporate diversification; excess value; executive compensation (search for similar items in EconPapers)
Pages: 36 pages
Date: 2012-09
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.buseco.monash.edu.au/eco/research/paper ... hoedeymishrapark.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://www.buseco.monash.edu.au/eco/research/papers/2012/3612corporatechoedeymishrapark.pdf [301 Moved Permanently]--> https://www.monash.edu/business/ [301 Moved Permanently]--> https://www.monash.edu/business)

Related works:
Journal Article: Corporate diversification, executive compensation and firm value: Evidence from Australia (2014)
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:mos:moswps:2012-36

Ordering information: This working paper can be ordered from
https://www.monash.e ... esearch/publications

Access Statistics for this paper

More papers in Monash Economics Working Papers from Monash University, Department of Economics Department of Economics, Monash University, Victoria 3800, Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Simon Angus ().