This study analyzed the impact of corporate diversification on firm value using a balanced panel dataset of 390 listed firms over a five-year time series from 1999 to 2003, the post-foreign exchange crisis recovery period in Korea. The empirical results showed the following: First, an inverted U-shaped nonlinear relationship exists between the level of diversification and firm value. While the progression of corporate diversification produces significant positive effects up to a certain level, beyond that level the negative effects become greater, leading to a decrease in firm value. That is, when the diversification level is below a certain threshold, an increase in diversification leads to an increase in firm value, which can be explained by the value-creation hypotheses such as the operational efficiency hypothesis, the internal capital market efficiency hypothesis, the coinsurance effect hypothesis, and the productivity efficiency hypothesis. When the diversification level exceeds a certain threshold, increased diversification results in value losses, consistent with the information asymmetry cost hypothesis, the cross-subsidization hypothesis, and the overinvestment hypothesis. Second, when analytical methods that do not account for the cross-sectional and time-series characteristics of the data are used, the results can differ substantially. Analyses using random effects models or OLS models failed to detect a meaningful relationship between diversification and firm value. However, analyses using fixed effects models revealed the existence of an inverted U-shaped nonlinear relationship between diversification and firm value. Therefore, when conducting analyses using cross-sectional and time-series data in future research, it is necessary to carefully select methodologies appropriate to the characteristics of the data.