(all downloads in Adobe Acrobat 3.01 for Windows): 1. Both Sides of Corporate Diversification: The value impacts of geographic and industrial diversification (12/99) 2. The Value Impact of Corporate International Diversification (6/03)
Both Sides of Corporate Diversification: The value impacts of geographic and industrial diversification with Charles Tang, Pace University Joseph Weintrop, CUNY Baruch Abstract This paper examines the effect of geographic and industrial diversification on firm value for a sample of over 31,000 firm-year observations of U.S. corporations from 1984 - 1997. Consistent with the predictions of most theories, we find the value of a firm with international operations is 2.7% higher than a comparable single-activity domestic firm, while the value of a multiactivity firm is 6.0% lower than a comparable portfolio of single-activity domestic firms. In addition, we demonstrate the existence of an omitted variable bias in estimating the value effect of industrial diversification when failing to account for geographic diversification when estimating. Sources of the value effects of both dimensions of diversification are also investigated.
The value of corporate international diversification with
Charles Tang, Pace University
Joseph Weintrop, CUNY Baruch Abstract This paper measures the market value impact of corporate international diversification on a sample of over 28,000 firm-year observations of U.S. corporations from 1984 - 1998. Consistent with most theoretical predictions, we find that international diversification adds value to the firm, but that the increment is small, on the order of 1% of the value of a comparable domestic firm. This premium is positively related to the breadth of the multinational network and varies over time with the level of the US$ exchange rate. We also demonstrate that the estimate of the international diversification premium is sensitive to test design, particularly with respect to the treatment of firm size. We show that differences in the control for firm size explain the difference between our results and those of recent papers suggesting a significant discount to international diversification.
Cross Border Valuation: The International Cost of Equity Capital with Bernard Dumas and Richard C. Marston Abstract This paper examines in detail the issues behind how a firm should evaluate the cost of capital for an investment in another country. It considers the different perspectives of risk as well as the different forms of risk in these investment and attempts to provide a consistent framework, based upon the first principles of financial theory, on how to measure and assess them.
| 
