We investigate the possibility that the diversification discount is due to differing growth opportunities between diversified and single-segment firms. We do this by comparing diversified business segments with individual single-segment same-industry firms of comparable growth opportunities....

A considerable amount of research has been devoted to why R2 differs across firms or markets, although little attention has been paid to the consequences of this difference. We fill this gap by investigating how differing R2 affects investors' assessment of firm value. Using a sample of 90,111...