Corporate diversification, firm value and operating performance: testing the relevance of segment accounting data
by Kingsley Onwunyiri Olibe; Ike C. Ehie; William R. Strawser
International Journal of Accounting, Auditing and Performance Evaluation (IJAAPE), Vol. 8, No. 2, 2012

Abstract: This study presents direct evidence on the effect of corporate international activity on firm value and operating accounting income. We find that foreign assets are positively related to firm value and accounting operating income, even after we control for identified determinants of value and earnings. We also test whether investors differentially price foreign and domestic assets. Our results provide evidence that investors value foreign and domestic assets distinctly with foreign assets enjoying greater capitalisation relative to domestic assets. Further, our analysis indicates that investors' asset valuation depends on the operating environment of the firm. Specifically, valuation differences arise from the market's assessment of the probability of recovery of assets located in different jurisdictions. We also document that foreign assets correlate to greater levels of operating income than do domestic assets. We find no evidence that international diversification destroys firm value.

Online publication date: Wed, 30-Jul-2014

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Accounting, Auditing and Performance Evaluation (IJAAPE):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com