The impact of industry classification schemes on financial research

Arbeitspapier

This paper investigates industry classification systems. During the last 50 years there has been a considerable discussion of problems regarding the classification of economic data by industries. From my perspective, the central point of each classification is to determine a balance between aggregation of similar firms and differentiation between industries. This paper examines the structure and content of industrial classification schemes and how they affect financial research. I use classification systems provided by the Worldscope and the Compustat database. First, this study gives a detailed description of the structure and methodology of industrial classification systems and the relevance in leading finance and accounting journals. Second, I construct a benchmark classification system to measure the performance of different systems and provide evidence that some systems a more homogeneous in terms of value drivers than others. Third, I examine how multiple valuation is influenced by industry classification and show that the results vary significantly for different systems.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB 649 Discussion Paper ; No. 2005,062

Classification and Topics

• Classification: Wirtschaft

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Weiner, Christian
• Event: Veröffentlichung
• (who): Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
• (where): Berlin
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/25081
• Last update: 10.03.2025, 11:43 AM CET