Diversification and excess value: Empirical evidence from Vietnamese listed firms

Abstract

This study investigates the relationship between diversification and firm value measured by firm’s excess value.
The research sample includes all Vietnamese listed firms in the period from 2011 to 2015. To overcome bias
problems due to sample selections, the Heckman two-step estimation is also used in this research. Our findings
show that when considering a linear relationship, diversification has a negative impact on firm’s excess value.
However, when considering a nonlinear relationship, there is a U- shaped relationship between diversification and
excess value. That is, at low level, diversification influences negatively on firm’s excess value, but at a high level,
this association switches from negative to positive