Corporate Diversification and Stock Returns

There are considerable empirical evidences in favor of and against the corporate diversification. A number of previous studies have found that industrial and geographic diversification have a negative effect on the value of the firm and the stock returns. In contrast, a growing stream of literature provides evidence in support of the diversification premium. There is no consensus on whether the documented discount can be attributed to corporate diversification per se or to the firms\u27 characteristics other than diversification. In this study, we re-examine the impact of industrial and/or geographic diversification on the stock returns. The investigation of the comprehensive sample of publicly traded firms over the last 20 years reveals that industrially diversified firms do not under-perform. While they are systematically different from single-segment firms, we did not uncover any abnormal performance that can be attributed to the industrial diversification per se. In addition, we find evidence in support of the previous studies about the beneficial effect of geographic diversification. Our results suggest that, in 1990s, industrially focused firms with operations abroad were rewarded more than purely domestic firms. This result is robust to the model specification and does not change whether the four-factor model or the characteristic-based model is used. However, the examination of corporate diversification events—mergers and acquisitions—reveals different picture with respect to industrial diversification. Our results suggest that acquisitions of independent firms outside of existing lines of business have a negative effect on shareholder value. Annual average buy-and-hold abnormal returns for firms acquiring targets in unrelated lines of business is about 15% more negative than that of firms acquiring targets in related lines of business. Pre-merger targets\u27 performance or differences in firm-specific characteristics cannot explain this post-merger return difference. Moreover, post-merger return changes cannot be explained by mergers\u27 characteristics, such as transaction size, method of payment or acquisition premia. Furthermore, examination of cumulative monthly abnormal returns reveals that although acquiring firms in both related and unrelated mergers experience post-merger returns decline, the performance of unrelated firms deteriorates much faster in unrelated than in related acquisitions. The overall results can be summarized as follows. Corporate diversification changes the nature of the firm. Not only the composition of the firm becomes different, the overall firm\u27s risk characteristics change. Thus, corporate diversification has an impact on firm value through changes of the firm\u27s characteristics. Moreover, corporate diversification per se becomes an important firm characteristic that affects stock returns in addition to other firm-specific characteristics

The State of the Region: Hampton Roads 2002

This is Old Dominion University\u27s third annual State of the Region report.While it represents the work of many individuals connected in various ways to the university, the report does not constitute an official viewpoint of the University, or it\u27s president, Dr. Roseann Runte. Our State of the Region reports maintain the modest goal of making Hampton Roads an even better place to live. We are proud of our region\u27s many successes, but realize that it is possible to improve the region\u27s performance. Yet, in order to improve our performance, we must have accurate information about where we are and a sound understanding of the policy options open to us. This year\u27s report places particular emphasis upon providing up-to-date information on how Hampton Roads compares to other regions nationally.https://digitalcommons.odu.edu/economics_books/1016/thumbnail.jp

The State of the Region: Hampton Roads 2000

Those who know and love the region of Hampton Roads wish to make it an even better place to live than it is currently. In order for us to achieve that end, we must know literally where we are in critical areas. This first State of the Region Report is designed to provide citizens with a detailed, though not burdensome, look at several critical aspects of the lives we live in Hampton Roads. The Report focuses on topics such as the regional economy (including the tourist and military sectors), the workforce, K-12 education, technology, and of course, government and regional cooperation.https://digitalcommons.odu.edu/economics_books/1018/thumbnail.jp