There are a variety of different business activities. Some companies have lack of diversity but others are diversified. One of the most important parameters for evaluation for choosing company for investing is company’s value. Therefore, this article investigates the effect of diversify by both indices of entropy and Herfindel on firm value for the companies listed in Tehran Stock Exchange. The effect of diversification on firm value is tested for the period of 2006 to 2014 for 88 companies. The target population for the period for investigation is chosen by using Cochrane method and systematic elimination method. Panel analysis is used for hypothesis testing, estimating procedures and testing model assumptions. Results show that there is not significant linear and non-linear relationship between the two variables of entropy index of business diversification and firm value but there is a significant negative relationship between the two variables of Herfindel index of business diversification and firm value. Results show a U-shaped relationship between these variables and the dependent variable.
