Spanish Listed Firms in the last period of economic crisis: The performance of corporate diversification

1. Pedro Garrido Prada
2. María Jesús Delgado
3. Desiderio Romero

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Abstract

Based on an original sample of Spanish listed companies from non-financial sectors during 2006-2011, we show that geographic diversification offers a flexible strategy for companies in a period of economic crisis. We find a U-Shaped geographic diversification-performance relationship and we portray lack of evidence of product diversification premium unless it is combined with high levels of geographic diversification. Results are robust after controlling for the endogeneity of both types of diversification. Our findings highlight the bidirectional influences of both strategies on firm performance and the value of the joint analysis to avoid underestimate the firm level of corporate diversification.

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