Contributions of Diversification, Promotion, and R & D to the Value of Multiproduct Firms: A Tobin’s q Approach - Len M. Nichols with Mannuel Jose and Jerry L. Stevens

Abstract:

This paper uses product line date from the Federal Trade Commission’s Line of Business Survey and financial valuation concepts to investigate the contributions of diversification, promotion, and R&D investment strategies to firm value. Empirical models are estimated to test the significance of diversification, promotional intensity, and R&D intensity as explanatory variables for excess value measured with Tobin’s q, the ratio of market value to replacement costs. Diversification was found to have a statistically significant positive influence on excess value while promotional intensity was found to reduce excess value. Deviations of R&D intensity from industry norms, above or below, were detrimental to firm value.

“Contributions of Diversification, Promotion, and R & D to the Value of Multiproduct Firms: A Tobin’s q Approach,” Financial Management, v 15, #4 (Winter 1986, with Mannuel Jose and Jerry L. Stevens).

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