Corporate diversification and firm performance: An inverted U-shaped hypothesis
Publish Year: 1395
نوع سند: مقاله ژورنالی
زبان: English
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شناسه ملی سند علمی:
JR_IJOL-5-4_012
تاریخ نمایه سازی: 3 اسفند 1398
Abstract:
This study aimed to investigate the relationship between corporate diversification and firm performance in a developing country. Previous studies have found that the mixed results have been established between these two constructs in developed countries such as linear, u-shaped or inverted u-shaped relationship. To this end, a sample of 141 non-financial companies over the period of 2003 to 2013 listed on Pakistani stock market was used to analyze the impact of diversification strategy on the performance of firm. Corporate diversification is divided into two types including product and geographic diversification. The findings of the study demonstrated that an inverted u-shaped relationship existed as performance increased up to a certain level due to the related diversification strategy and then it fell down drastically. It showed that too much diversification creates agency problems and internal inefficiencies. It has implications for agency problems, weak corporate governance structures, and family relationships
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Authors
Sajid ali
Department of Management Sciences, Capital University of Science and Technology (CUST)
Shujahat Haider Hashmi
Department of Management Sciences, Capital University of Science and Technology (CUST)
Tahir Mehmood
Research Associate, Muslim Institute & MPhil Scholar Faculty of Business Administration, Preston University Kohat, Islamabad Campus