Capital market development, international integration, legal systems, and the value of corporate diversification: A cross-country analysis

Using a database of more than 8,000 companies from 35 countries, we find that the value of corporate diversification is related to the level of capital market development, international integration, and legal systems. Our results suggest that the financial, legal, and regulatory environments each have an important influence on the value of diversification. Moreover, the optimal organizational structure and corporate governance may be very different for firms operating in emerging markets than they are for firms operating in more developed and internationally integrated countries.