This paper examines the relationship between Tobin's q and corporate diversification, finding a negative correlation. The authors show that diversified firms have lower q values compared to equivalent portfolios of specialized firms, and this relationship holds across different diversification measures and when controlling for other determinants of q. The study also finds that firms with more segments have lower q values than those with fewer segments, suggesting that diversification may not be valuable as an intangible asset. The evidence suggests that firms seek growth through diversification when internal growth opportunities are exhausted, but the market does not recognize diversification as a valuable asset. The paper uses a "chop-shop" approach to compare the q of diversified firms to the q of specialized firms in the same industry, providing insights into the efficiency of diversified firms.This paper examines the relationship between Tobin's q and corporate diversification, finding a negative correlation. The authors show that diversified firms have lower q values compared to equivalent portfolios of specialized firms, and this relationship holds across different diversification measures and when controlling for other determinants of q. The study also finds that firms with more segments have lower q values than those with fewer segments, suggesting that diversification may not be valuable as an intangible asset. The evidence suggests that firms seek growth through diversification when internal growth opportunities are exhausted, but the market does not recognize diversification as a valuable asset. The paper uses a "chop-shop" approach to compare the q of diversified firms to the q of specialized firms in the same industry, providing insights into the efficiency of diversified firms.