Research on business diversification and corporate value in times of financial crisis in Vietnam

Abstract

On thefinancial perspective, optimality of asset value for shareholders is always a main target for all corporates. Therefore, how to increase corporate value not only has attracted research scholars but also received attention from business managers. This issueis even more important in the context of most of countrieshad just gone through the global financial crisis and economic downturn . Since the financial crisis burst in 2008, the trends of business diversification and country diversification have becomeincreasingly popular. In the view of "Don’ t putall your eggs in one basket" (Pindyck & Rubinfeld, 2014) , these trends are good signals, contributing to increas ing corporate value and shareholder benefits (Lewellen, 1971). Therefore, t his paper aims to assess the relationship between diversification and corporate value in times of financial crisis in Vietnam.Research sample s are42 non-financial companies listed on the HoSE from the first quarter of 2008 to the fourth quarter of 2011. Weuse two methods for estimating panel data regression: (1) Regression method Pooled OLS; and (2) Random Effect Model(REM). The results provide empirical evidence about the impact of diversification ( businessand country) on corporate value in times of financial crisis in Vietnam. Based on this research, Vietnamese corporates can consider or make decisions related to diversification, including the business diversificationand country diversification in order to increase corporate value.