Tobin's Q, Corporate Diversification and Firm Performance

Authors: Larry H.P. Lang, René M. Stulz - 1993 cited by 685

In this paper, we show that Tobin's q and firm diversification are negatively related. This negative relation holds for different diversification measures and when we control for other known determinants of q. We show further that diversified firms have lower q's than equivalent portfolios of specialized firms. This negative relation holds throughout the 1980s in our sample.