Impact of Corporate Diversification on Real Option as a Component of Marker Value of Firms: Evidence from Nairobi Securities Exchange

Abstract

This study aimed at determining effect of corporate diversification on real option as a component of market value of firms. Hypotheses were formulated and tested for sixty four listed firms at the NSE. The study applied census survey since population under study is countable. The time frame of analysis is five years between 2013 and 2017.Out of the 64 listed companies targeted, 52 were analyzed forming 81% of the population. A positivistic research philosophy was used since it’s based on quantification of phenomena under study. Correlational descriptive research designs and correlation analysis were applied. Formulated hypotheses were tested by application of hierarchical multiple regression analysis. The results show a direct significant association between the variables line with previous studies findings. The findings can be used by the management to value joint ventures independently at point of termination. The study can also benefit scholars by providing analytical tools to make strategic decisions. Policy Makers will use the study to craft relevant corporate regulations on real option investments.

Keywords: Corporate diversification, real option, market value of firms, globalization

DOI: 10.7176/RJFA/10-2-02