The value impact of international and industrial diversifications on public‐listed firms in Malaysia

The impact of corporate diversification on firm value in Kenya

“…Multiindustry/domestic firms reported the lowest mean Tobin"s Q (x = -0.138) showing that industrially diversified firms that were focused on the Kenyan market were generally valued lower than firms in the other categories. This finding was different from the study done by Lee (2013) which discovered that multi-industry/domestic firms were the most valued companies in Malaysia. Interestingly, multi-industry/geographical firms posted the lowest mean values of capital, sales and total assets.…”

“…Presumably, there are many benefits a firm can achieve if it decides to diversify. For instance, Lee (2013) notes that many organizations from around the world are venturing into international markets in the current globalization era so as to access large and growing non-local markets due to the maturity, saturation and intense competition in local markets. Villalonga (2000) also asserts that firms usually diversify in order to acquire market power and undertake reciprocal buying with other big companies so as to drive smaller firms out of business.…”

“…For instance, Lee (2013) focused on Malaysia, and had 267 firms while Khanna and Palepu (2000) used 1309 firms in India. Using firm data from 2006 to 2011, the study sample yielded an unbalanced panel with 221 firmyears.…”

“…The mean and standard deviation of various variables from the total sample are shown in Table 1. Following previous studies such as Lee (2013), the companies were categorized into four groups based on industrial and geographical diversification. For this study, geographical diversification was taken as the degree to which companies possessed or controlled product-related activities in different countries as put forward by Kreye (2007).…”

“…This global diversification has been spurred by various factors such as saturated domestic markets and a quest to secure bigger market shares globally. International diversification has become an important business growth strategy (Denis et al, 2002;Lee, 2013).…”