New evidence on value and profitability effect using common analysts –method for defining peer firms

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Volume Title

School of Business | Master's thesis

Date

2019

Major/Subject

Mcode

Degree programme

Finance

Language

en

Pages

57 + 5

Series

Abstract

I study the effects of different diversification strategies on firm excess value and profitability in Nordics between 2012 and 2018. I challenge the common methods used in prior literature and utilize a novel common analyst – method to define peer firms created by Kaustia and Rantala (2018). My results show that there seems to be a significant diversification discount for related and unrelated diversification strategies in Nordics when compared to focused peer groups simulated by the common analyst -method. I also show that the source for the diversification discount is the worse operational profitability in these diversification strategies compared to the focused peers.

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Thesis advisor

Puttonen, Vesa

Keywords

diversification strategy, diversification discount, profitability, peer group

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