Effect of global diversification on firms value

Abstract

In English literature Diversification means “change” and in finance it means to reduce or to eliminate risk. (Frank K.et al 2005) Uncertainty that is unquantifiable in nature prevails in business both in systematic and un-systematic ways. According to wizards of finance there are mainly two types of risk, systematic risk that comes from the system which in which business is operating. This risk is quantifiable and measureable through “Beta coefficient”, it cannot be eliminated but its effect and impact can be reduced or lowered through variety of financial techniques. The un-systematic risk that is company specific and is quantifiable can be eliminated through different financial techniques such as hedging and business diversification (Timothy J. et al 2003).