Impact of Corporate Diversification on the Market Value of Firms: A study of Deposit Money Banks Nigerian

Abstract

This paper investigates the impact of diversification on banks market value. Many studies have been conducted on the effect of diversification on firm value. From a theoretical view point, it is commonly accepted that if the costs of diversification exceed its benefits, the market will discount the share price of diversified firms. The paper hypothesized that diversification does not impact significantly on market value of banks in Nigeria. Adopting an Ex-post facto research design and applying OLS, the regression results at 5% significant level of significance rejected the null hypothesis and thereby accepting the alternate. This suggests that corporate diversification impacts significantly on the market value of banks, implying that diversification in Nigerian banks impacts significantly on the market value of the diversified banks.

Keywords: Diversification; market value; regression; banks.