Do US Multinationals Differ from Non-US Multinationals in Value Creation? ACES Working Paper 2004.1, February 2004

Using a sample of domestic and multinational conglomerates from four countries, this paper shows that the value impact of corporate diversification is not uniform across countries. The evidence shows that smaller countries like Germany, Japan, and the UK have a larger proportion of multinational conglomerates because multinational conglomerate diversification does not destroy value. These results contradict previous literature, which primarily focuses on US firms. In particular, though industrially diversified firms are valued at a discount in the US, they are valued at a premium in Germany and when multinational conglomerate diversification is taken into account this premium disappears. These results suggest that the value of corporate diversification is related to the size of the country and its institutional framework