Corporate Diversification and Financial Performance: A Review of Literature

Doaei, Meysam; Anuar, Melati B. Ahmad; Hamid, Nik Intan Norhan Adb

doi:10.5296/ajfa.v4i2.1786

Cited by 11 publications

(14 citation statements)

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“…total corporate diversification, related diversification, and unrelated diversification. All of these variables are measured by using the entropy measure (E) as espoused by Jacquemin and Berry (Doaei et al 2012;Jacquemin and Berry 1979;Palepu 1985;Purkayastha 2013). The advantages of using the entropy measure are objectivity, reliability and ability to capture the level and type of diversification concurrently (Martin and Sayrak 2003;Sambharya 2000).…”

Section: Variables and Measurementsmentioning

confidence: 99%

Diversification and corporate social performance in manufacturing companies

Patrisia

Dastgir

2016

Eurasian Bus Rev

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The effects of diversification on financial performance are well-established, less so the way in which diversification influences company behaviour towards stakeholder demand and social concern. This paper investigates the relationship between business diversification and corporate social performance (CSP) in an industrial setting, in Indonesia. CSP is measured with an index constructed from content and disclosure analysis of annual company reports in line with global reporting initiative standards. A sample of 107 listed manufacturing companies from the Indonesian Stock Exchange is used to estimate a lagged multiple regression model to show that industry-level diversification does not have an effect on CSP. However, distinguishing between related and unrelated diversification produces a different outcome whereby, related diversification is negatively and statistically significantly correlated with CSP. Unrelated diversification, on the other hand, shows a positive and statistically significant relationship. It means the relationship between unrelated diversification and CSP is more positive than the relationship between related diversification and CSP. The findings offer a unique insight into industrial diversification and CSP in Indonesia's expanding manufacturing sector.

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Section: Variables and Measurementsmentioning

confidence: 99%

Diversification and corporate social performance in manufacturing companies

Patrisia

Dastgir

2016

Eurasian Bus Rev

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“…Diversification happens when a company enters a new industry [26]; a new business segment [5] , or runs more than one business [4]. Diversification is differentiated into product diversification and geographic diversification [12], [27]. Product diversification consists of related and unrelated diversification.…”

Section: Diversificationmentioning

confidence: 99%

“…The Herfindahl Indeks number ranges between 0 and 1; if the number is getting closer to 1, it means that the company is getting more diversified [27], [33], [35].…”

Section: Diversification (The Independent Variable)mentioning

confidence: 99%

Does Diversification Strategy Reduce The Level of Financial Distress? (Evidence from Indonesia)

Nugrahanti¹,

Sutrisno²,

Rahman³

et al. 2019

Proceedings of the Proceedings of the 1st Sampoerna University-Afbe International Conference, SU-AFBE 2018, 6-7 December 2018,

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The objective of this study is to investigate the effect of diversification strategy towards the level of financial distress. Altman Z-score is used to measure the level of financial distress and Herfindahl index is used to measure diversification in this research. This study used 101 non-financial companies listed in Indonesian Stock Exchange during 2014-2016 (303 firm years) as samples. For testing the hypotheses, Mann Whitney test and panel data regression with random effect model was used. The results showed that there are Z score differences between high and low diversified firms; and diversification has a negative effect towards the level of financial distress. The control variables testing showed that liquidity, profitability, and firm size negatively influence the level of financial distress, while leverage has a positive effect towards the level of financial distress. Besides, the type of diversification has no effect toward financial distress.

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“…However, the prior studies have ignored the impact of group size and product portfolio diversification on CSR engagement, exposing the firms to various stakeholder demands and social issues and forcing the firms to build a social reputation through CSR spending. The prior literature has focused mainly on the impact of corporate diversification on financial performance (Doaei et al, 2014;Doaei et al, 2012;Lee & Jang, 2007;Tanui & Serebemuom, 2021). However, few studies concentrated on the cross-country diversification of business (Brammer et al, 2006;Strike et al, 2006).…”

Section: Introductionmentioning

confidence: 99%

CSR Spending in India: Exploring the Linkages With Business Group Affiliation and Product Portfolio Diversification

Potharla

Dissanayake

Amirishetty³

2023

AFL

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The present study aims to examine the influences of group affiliations status on the CSR spending of a firm and also to test how the group size and interaction of group size and product portfolio diversification influences the CSR spending. The sample of the present study covers 1,513 Indian firms coming under the ambit of CSR reporting, represented through the unbalanced panel data set of 4,459 firm-years from the year 2014 to 2019. The baseline model regresses CSR spending on the group affiliation status and set of controlling variables which are having the impact on CSR spending by using panel least squares regression model. The baseline model is extended to test the impact of group size and interaction of group size and product portfolio diversification on the CSR spending. Industry variations with regard to CSR spending are controlled by introducing industry fixed effects into the regression model. The findings of the study reveal significant positive impact of group affiliation status on CSR spending. The results are also robust to the group size effect and the interaction effect of group size and product portfolio diversification. The findings are supporting stewardship theory and socio—emotional wealth creation view of the group affiliated firm which asserts that group affirms experience variety of stakeholder demands and social issues. Building social reputation through CSR activities will be helpful in handling such situations. The findings also proved that larger group firms with wider product diversification are more encouraged towards CSR spending. This is the first study which tests the impact of group size and also the interaction of group size and product portfolio diversification on CSR spending. The study contributes to the literature on how the ownership style, especially, group affiliation status, influences the social engagement of a firm

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Corporate Diversification and Financial Performance: A Review of Literature

Cited by 11 publications

References 0 publications

Diversification and corporate social performance in manufacturing companies

Diversification and corporate social performance in manufacturing companies

Does Diversification Strategy Reduce The Level of Financial Distress? (Evidence from Indonesia)

CSR Spending in India: Exploring the Linkages With Business Group Affiliation and Product Portfolio Diversification

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