Faculty Scholarship 1994 - Present

Corporate Diversification and the Price-Earnings Association

This study investigates the effect of diversification on the association between firm value and earnings using both the levels and the changes analyses. Results show that: (1) the association between stock price and earnings for diversified firms is higher than that for focused firms, (2) the association is stronger when degree of diversification is higher, and (3) the association is improved signficantly when quality of earnings is also considered.