Diversification, Organization, and Value of the Firm

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2 Citations (Scopus)

Abstract

Because corporate diversification coevolves with organizational structure, a discount for diversification, which is widely documented in the literature, can be caused by organizational structure rather than by the industrial scope of the firm. I examine this possibility based on a large sample of Japanese firms for which the legal (parent–subsidiary) structure of the organization is easily observable. I identify a significant discount for diversified firms with and without control over the organizational structure. I also find that firms with a legally segmented structure (e.g., holding companies) are deeply discounted. My results suggest that diversification and organization are both important determinants of firm value.

Original languageEnglish
Pages (from-to)467-499
Number of pages33
JournalFinancial Management
Volume45
Issue number2
DOIs
Publication statusPublished - 2016 Jun 1

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ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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