Multinational Diversification and Corporate Performance: Evidence from European Firms

Mathur, Ike; Singh, Manohar; Gleason, Kimberly C.

doi:10.1111/j.1354-7798.2004.00258.x

Cited by 26 publications

(14 citation statements)

References 49 publications

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“…The existence of a technological gap between foreign and domestic owners has become a stylized fact in the applied trade literature. Specifically in the European context, Mathur et al (2004) show that foreign-owned firms involved in multinational operations do better in financial performance than purely domestic units. Similarly, Estrin et al (2009) show that efficiency in foreign-owned (privatized) firms in new EU member countries is higher than in domestically owned firms.…”

Section: Hypothesis 1 H0: Firm Characteristics Do Not Effect a Firm'mentioning

confidence: 99%

Corporate efficiency in Europe

Hanousek

Kočenda

Shamshur

2015

Journal of Corporate Finance

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Using a stochastic frontier model and a comprehensive dataset, we study factors that affect corporate efficiency in Europe. We find that (i) larger firms are less efficient than smaller firms, (ii) greater leverage contributes to corporate efficiency, and (iii) high competition is less conductive to efficiency than moderate or low competition. In terms of ownership, we find that (iv) efficiency increases when a majority owner must deal with minority shareholders and that (v) domestic majority owners improve efficiency more than foreign majority owners when no minority shareholders are present, but (vi) the opposite is true when minority shareholders hold a substantial fraction of the firm's equity. In the analysis, we distinguish between a pre-crisis period (2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008) and a post-crisis period (2009)(2010)(2011), and find that our results are sensitive to the period of observation.

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Section: Hypothesis 1 H0: Firm Characteristics Do Not Effect a Firm'mentioning

confidence: 99%

Corporate efficiency in Europe

Hanousek

Kočenda

Shamshur

2015

Journal of Corporate Finance

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“…The multinational nature of the firm 9 is captured by two dummy variables that indicate the prior (one year before the event) global diversification status of the firm (once lagged GStatus), 10 and whether the acquired or divested business segment also causes changes in the firm's geographical diversification (GEO). The last set of variables that might affect the firm's decision describe whether the added or dropped segment is in the same industry as the firm's core business (Core), whether it is in the same industry as the other segments of the conglomerate (Related), 11 and whether the acquired or divested business segment belongs to an industry that is 9 We control for global diversification, because Denis et al (2002) show that industrial diversification is closely related to global diversification, and because global diversification has been shown to have its own valuation consequences (see Christophe, 1997;Denis et al, 2002;Click and Harrison, 2000;Bodnar et al, 2003;Mathur et al, 2004 andKan, 2006). Consequently, in our analysis we control for geographic diversification to obtain a clearer picture of the effects on firm's excess value attributable only to business diversification.…”

Section: Variablesmentioning

confidence: 99%

Diversification, Refocusing and Firm Value

Çolak

2010

Euro Fin Management

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At any point in time a firm faces three restructuring choices: diversify, refocus, or do nothing. This study analyses the causes and the consequences of these actions in a unified framework using the appropriate methodologies. Various factors, such as firm's characteristics and multinational nature, its industry's characteristics, its exchange and index inclusion, and divested (or acquired) segment(s)' industry conditions, are considered as the determinants of the diversifying and the refocusing decisions. The estimation results from the corresponding multinomial logit model suggest that refocusing occurs generally due to firm-specific reasons, and diversification due to outside factors, such as industry and economic conditions. Added or dropped segment's industry profitability, its relationship to the core business of the firm, and its relatedness to the businesses of the conglomerate's other segments have a nontrivial effect on either decision. In a related analysis, the paper explicitly models and estimates the valuation consequences that are sustained by the firm after it undertakes a refocusing or a diversification action. To isolate the changes in firm's value that are due to these decisions only, a 2SLS estimation is used to control for endogeneity that arises because the factors that affect a firm's value are likely to have also induced the firm to make the corresponding decision. The novelty of my approach is in its inclusion of variables measuring the consequences due to both actions, the diversification and the refocusing, in the same valuation equation. Contrary to some earlier findings, I find no evidence of 'diversification discount' or 'refocusing premium.' The choice of this paper to analyse all corporate restructuring decisions in a unified framework yields valuable business insights into the reasons for undertaking such corporate events.

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“…Notwithstanding that, more recently some empirical studies have started to submit that a high degree of diversification contributes to the creation of value (David et al 2010;Gomes and Livdan 2004;Hadlock et al 2001;Jandik and Makhija 2005;Mathur et al 2004;Schoar 2002). More interestingly, Campa and Kedia (2002) and Villalonga (2004b) found that highly diversified firms can in fact create value under some contingencies.…”

Section: Introductionmentioning

confidence: 94%

Revamping research on unrelated diversification strategy: perspectives, opportunities and challenges for future inquiry

Picone

Dagnino

2015

J Manag Gov

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With the aim of achieving an advanced understanding of current research on unrelated diversification and providing fruitful groundwork to foster active interchange between disciplinary traditions, this paper detects articles from two relevant research streams; i.e., strategic management and financial economics. We first provide a brief overview of management thinking on unrelated diversification strategy. Then, we present a conceptual map that offers a comprehensive appreciation of unrelated diversification strategy antecedents (i.e., environmental and institutional, organizational value-enhancing, and managerial drivers), implementation process (i.e., managerial complexity, misallocation of resources, and structural inertia), and consequences (i.e., diversification premiums and discounts). Finally, we unpack the major gaps in our current knowledge that may help refocus the research agenda on unrelated diversification strategy and revamp the apparent waning proclivity of this issue.

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Multinational Diversification and Corporate Performance: Evidence from European Firms

Cited by 26 publications

References 49 publications

Corporate efficiency in Europe

Corporate efficiency in Europe

Diversification, Refocusing and Firm Value

Revamping research on unrelated diversification strategy: perspectives, opportunities and challenges for future inquiry

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