eThesis - Kauppakorkeakoulun sähköiset gradut

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In this master's thesis the market value of diversified firms has been compared to the value of sin-gle-segment firms, in order to find out how different types of diversification affect firm value. The impact of the 2008 financial crisis on the valuation of diversified firms has also been investigated and discussed. The empirical results point out that, between 1997 and 2012, industrially diversified firms have been trading at a premium of 22.5% compared to focused firms, while globally diversi-fied firms have not. The combination of industrial and global diversification has been found to yield an additional premium of 9.2%. This positive effect is even stronger for firms that diversified into unrelated industries after the crisis. It has also been discovered that the premium for industrial diversification increases with the number of segments a firm reports to be operating in. The empirical findings have also been interpreted from an accounting perspective. It has been discussed how earnings management can explain the existence of a diversification discount, especially for cross-border diversification. It has also been illustrated how diversified firms have a greater propensity towards expansion through acquisition and how this could help explaining the discount found by studies using Tobin's q as a measurement for comparing firm value. The different theories explaining the international business related background of corporate diversification have also been presented and discussed, from Coase's market imperfection theory to Buckley and Casson's internationalisation theory and Dunning's eclectic paradigm. The relation between diversification and market entry mode has been described and it has been emphasised how the different combinations of diversification strategies and host-country entry modes are significant for a firm's internationalisation approach.