This dissertation presents two essays that examine whether international diversification creates value. Each essay analyzes the issue from a distinct perspective using different methodologies. The dissertation extends the current literature by addressing several methodological limitations. The analysis addresses the confounding of international and industrial diversification by separately examining industrial, international, and multinational conglomerate diversification. It also addresses the inappropriate benchmarking by excluding internationally or industrially diversified firms from the benchmarks. The analysis accounts for the endogenous nature of the diversification decision. Finally, the sample is extended beyond the US.; The first chapter is a cross-country analysis of global diversification for single industry multinational firms. I study firms that are globally diversified across national borders but are not industrially diversified so that excess value can be entirely attributed to global diversification. This approach addresses the question: Is the multinational firm as a whole worth more or less than its individual parts, i.e. would an investor holding multinationals get a higher return than if he or she were to hold an international portfolio of non-diversified firms? I value multinationals relative to a sales-weighted international portfolio of single industry domestic firms located in the countries where the multinational operates. I find that on average globally diversified firms from Japan are valued less than the international benchmark portfolio, while firms in the UK and the US are not. Increased globalization increases firm value in the UK and the US but the magnitude of the effect changes when one controls for the endogeneity of the diversification decision.; The second essay presents a cross-country analysis that shows that the industrial diversification discount is affected by multinational conglomerate diversification and the impact is valued differently by investors across the five countries in the sample. In the US, as expected, industrial diversification decreases firm value while international diversification increases it. Multinational conglomerates trade at a premium in Germany and Japan but not in France. The positive impact of multinational conglomerate diversification drives the industrial diversification premium in Germany. The impact of the different types of diversification is also affected by the level of diversification and the international location of the firms' operations. Ignoring the impact of multinational conglomerate diversification, as is common in the literature, can lead to erroneous conclusions.
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