Investigating the Effects of Corporate Diversification Using the Berger and Ofek Methodology: An Application of Turkey.

This paper examines effects of corporate diversification on firm value using methodology of Berger and Ofek (1995) excess value measures based on assets and sales multiples. We match diversified firms and single-segment firms traded in National Market of ISE during the period of 2005-2010 in order to examine the possible effects of diversification on the firm value in terms of increasing or decreasing. According to the results of balanced panel data regression analyses, diversified firms trade at average diversification premium comparing to similar single segment firms. The results underscored the consistency between diversification measures such as Jacquemin-Berry entropy index, Berry-Herfindahl index and line of business data.