Valuation effects of global diversification

This paper examines the effect of global diversification on firm value using a data set of US firms from 1994 to 2002. We document that global diversification enhances firm value. Specifically, we find that Tobin's q, our proxy for firm value, increases with foreign sales (measured as a fraction of the firm's total sales), even after we control for well-known determinants of firm value. In contrast, we find no such evidence for industrial...