CFC members Irina Ivashkovskaya and Irina Skvortsova presented their research 'Diversification and Firm Performance: Evidence from Organic and Inorganic Growth in Developed and Emerging Capital Markets' at the regular Research Workshop of the HSE Finance Department
Prof. Irina Ivashkovskaya and Irina Skvortsova, members of Corporate Finance Center, presented their report 'Diversification and Firm Performance: Evidence from Organic and Inorganic Growth in Developed and Emerging Capital Markets' at the regular Research Workshop of the HSE Finance Department 'Empirical Corporate Finance' on June 8th, 2015.
Prof. Irina Ivashkovskaya, Head of the Finance Department, Head of Corporate Finance Center
Irina Skvortsova, researcher at Corporate Finance Center
We address the issue of differences in firm performance depending on the pattern of diversification strategy. We analyze differences in firm performance, as well as the form of dependence between the level of diversification and performance depending on the pattern of diversification through organic or inorganic growth.
On the sample of 861 companies with 253 companies representing emerging capital markets and 608 companies from developed capital markets for the period of 2009-2012 we show that in developed capital markets corporate diversification through organic growth creates value in the short-term and long-term run while diversification through inorganic growth creates value only in the short-term period. We also prove that in emerging capital markets diversification through organic growth destroys value in the short-term period but results in value creation for the inorganic pattern of diversification in the short-term and long-term run.