Diversification's Effect on Firm Value; Evidences from Petrochemical Industry

Diversification’s effect on firm performance has been the subject of many researches resulting in various findings. In this research we have approached the issue using two characteristics: first, we concentrate on quality of industry segmentation to recognize diversification; second, firm value is the index of performance. Some characteristics in petrochemical industry make it appropriate for our research. Petrochemical companies’ data between years 2010 and 2014 are exploited. We used regression and correlation analysis to study the diversification effect. The results indicated a negative effect of diversification on firm value which is called diversification discount. The outcome of this research also highlights two significant points: first, there are some evidences for effect of macroeconomic factors on appearance of diversification discount or premium. Second, correlation between diversification and value increasing factors was observed. So in the case of dominance of these factors, diversification premium is expected.