DIVERSIFICATION’S EFFECT ON FIRM VALUE – EVIDENCE FROM FOOD AND TOBACCO FIRMS

Abstract

This research was conducted to determine effects of diversification of the business
sector and investment on the value of food, beverage and tobacco firms. The findings of the research showed that there is a quadratic relationship between investment diversification and firm value. The result also indicated firm value is positively related to firm size and negatively related to financial leverage. The relationship between the diversification of the business and the value of the company was not found.

Keywords: Diversification, firm value, food firms, tobacco firms, quadratic relationship.