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Corporate diversification and performance: evidence on production efficiency
This study utilizes the COMPUSTAT database to extract 31,002 firm-year observations for the firms publicly traded on US exchanges during the 1995–2001 period, and examines the relationship between corporate international diversification and technical productive efficiency. The parameters of a stocha...
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Published in: | Journal of multinational financial management 2004-04, Vol.14 (2), p.135-152 |
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Main Author: | |
Format: | Article |
Language: | English |
Subjects: | |
Citations: | Items that this one cites Items that cite this one |
Online Access: | Get full text |
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Summary: | This study utilizes the COMPUSTAT database to extract 31,002 firm-year observations for the firms publicly traded on US exchanges during the 1995–2001 period, and examines the relationship between corporate international diversification and technical productive efficiency. The parameters of a stochastic frontier function are estimated simultaneously with the firm-specific production inefficiency effects in a panel framework. After controlling for product diversification, industry and firm size, the author finds the degree of international diversification is positively related to production efficiency. The results are robust to the choice of multinationality variables including number of geographic segments, foreign income ratio and foreign tax ratio. In all, the results suggest that multinational corporations are utilizing their operating flexibility. |
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ISSN: | 1042-444X 1873-1309 |
DOI: | 10.1016/j.mulfin.2003.07.006 |