Growth opportunities and the effect of corporate diversification on firm Excess value

The main purpose of this research is to study the impact of corporate diversification on firm’s excess value by including opportunities among firms listed in Tehran Stock Exchange. Excess value as an independend variable was measured by the natural logaritm of firm’s actual value (sum of market stock value and debt book value) to its imputed value. Diversified firms imputed value was calculate the imputed value of each segment by multiplying the median ratio, for single-segment firms in the same industry, of total capital to sales by the segment’s level of the accounting item. To measure independent variable (diversification), We use three indexes including Entropy, Herfindal and number of sections. Growth opportunities was measured by Q Tobin’s ratio. The initial sample of this research includes 191 firms listed by Tehran Stock Exchange (55 diversified firms and 136 single-business firms) for the period of 2013 to 2017. Regression results showed that diversification has a significant impact on excess value. All three diversification indexes including Entropy, Herfindal and number sections have positive impact on excess value. Also, the research results indicate the moderating role of growth opportunities variable on the relationship between diversification and excess value.