Multibusiness firms and performance in Italy. What role does relatedness play?

Abstract

This paper evaluates the effect of diversification strategy on corporate value for a sample of Italian companies. It accounts for both the level of diversification and relatedness components. Empirical analyses show a U-shaped curvilinear relationship between diversification and value. In contrast to the mainstream literature, our results highlight that related diversification has a negative effect, while unrelated diversification is a value-creating strategy. JEL classification: L25, M10, Keywords: Product diversification, Multi-business firm, Relatedness, Firm performance, Firm value