Diversification Strategy and Good Governance: Does It Affect Firm’s Leverage?

Nahda, Katiya; Rahmadana, Azaria Lionara

doi:10.26905/jkdp.v25i3.5758

Cited by 3 publications

(3 citation statements)

References 64 publications

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“…This conclusion is not consistent with the work of Agrawal and Mandelker (1987), Hill and Snell (1988), Johnson et al (1993), andDenis et al (1997). Nahda and Rahmadana (2021) showed that cost advantages occur in diversified firms, including higher debt ratios in the firm's capital structure. The participation of the manager has a negative and significant effect on the growth of the main activity this result confirms the study conducted by Morck et al (1988) and Jensen and Ruback (1983), which suggested that the participation of the manager is negatively related to the strategic choice of the company and positively to the growth of the main activity.…”

Section: Results Of Estimates and Interpretationscontrasting

confidence: 68%

Corporate governance and its impact on strategy diversification and growth in the Saudi non-oil sector

Kouki¹,

Kachoukh²

2022

Int. j. adv. appl. sci.

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The purpose of this article is to study the influence of internal governance mechanisms on the diversification and growth strategy of Saudi firms in the non-oil sector. Considering a sample of 70 Saudi companies observed over the period 2006-2014 and using the Linear Regression method, correlated panels, corrected standard errors (PCSEs). Our empirical results show the structure of the board of directors that motivates Saudi firms to run less risk and diversify all activities rather than refocus the group's activity. We have shown that the presence of the largest shareholder has a positive effect on the diversification strategy. These results support our basic assumptions that firms with a high concentration of capital favor diversification rather than the risk that accompanies the growth of the firm's overall activities. In line with our reasoning and consistent with previous research, our main contribution is that the control mechanisms are not neutral with regard to the diversification strategy. The verification of these assumptions in the Saudi context makes it possible to enrich the verification of the positive relationship between governance and the diversification of firms.

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Section: Results Of Estimates and Interpretationscontrasting

confidence: 68%

Corporate governance and its impact on strategy diversification and growth in the Saudi non-oil sector

Kouki¹,

Kachoukh²

2022

Int. j. adv. appl. sci.

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“…Diversification of insurance products (product diversified -PD) is measured by the Herfindahl Index (Wu & Deng, 2021); (Foong & Idris, 2012); (Nahda & Rahmadana, 2021). Pi is the total premium of the product line divided by the total premium of the insurance company, n symbolizes the number of product lines.…”

Section: Leverage = Total Liabilities Total Equitymentioning

confidence: 99%

“…An emerging market firm involve to has a higher proportion of diversification costs since the product's issues are changing faster (Nwakoby & Ihediwa, 2018). However, the resulting study by (Nahda & Rahmadana, 2021) states that there is a positive relationship between diversification and leverage, indicating higher power for a more diversified company.…”

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confidence: 99%

Leverage, Product Diversification, and Performance of Life Insurance Companies in Indonesia

Septina

2022

J. Keuang. dan Perbank.

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The insurance sector is often faced with dynamic economic changes. Product adjustments to new policies and the availability of funding for the company's operational activities are crucial. This study aims to observe the effect of leverage on the financial performance of life insurance companies and examine the moderation of product diversification on the relationship of leverage to the financial performance of life insurance companies. The study also aims to confirm the pecking-order theory related leverage funding and the synergistic- effect theory about diversification product strategy. Firm-size variables and dummy periods are used as control variables. Leverage is proxied by the ratio of total debt to total equity, product diversification uses the Herfindahl index, and financial performance is proxied by return on equity. The research sample are 25 life insurance companies in Indonesia registered with the Financial Services Authority (OJK) and have published financial reports for the period of 2016 to 2020. The data analysis method uses panel regression analysis with the estimation approach of the Chow Test, the Hausman Test, the Lagrange Multiplier Test, and the moderated regression analysis. The results show that leverage has a significant negative effect on the performance of life insurance companies, and product diversification significantly strengthens the effect of leverage on the performance of life insurance companies. Firm size has a significant positive effect, while the dummy period variable has no significant effect on the performance of life insurance companies. Company with high or low leverage, both must be able to see the potential and current market risks then adjust policies. For both creditors and investor can take advantage of information to provide funding and investment on the relationship between the use of leverage and the life insurance company's product diversification strategy. Finally, the regulatory authorities of the insurance sector present as controllers of life insurance companies in serving their customers.JEL: G2, G22, M11

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Strategies to Diversify International Activity of Ukrainian Metallurgical Enterprises

Starostina,

Derbenova,

Sharoian

2023

BulEcon

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The article is focused on researching and developing strategies for the diversification of international activities for enterprises in the Ukrainian metallurgical industry. It is emphasized that the metallurgical industry is of strategic importance to the economy of Ukraine, as it is a net exporter, generates numerous job opportunities, contributes significantly to the country's GDP, and attracts foreign capital investments. Various international diversification strategies are proposed, including diversification of sales geography, diversification of production, and diversification of the product portfolio. A comparative analysis is conducted to determine the advantages and disadvantages of each strategy, to identify the most relevant approach for specific enterprises. The comparative analysis revealed that diversification of international activity is the most effective strategy for minimizing risks and maintaining the profitability of companies. Three diversification strategies for the international activities of Ukrainian metallurgical enterprises are proposed, which include diversification of sales geography, diversification of production, and diversification of the product portfolio. Recommendations and measures for implementing each of the proposed international diversification strategies are presented. It is determined that, given the current war conditions, the priorities for metallurgical enterprises in developing strategies for international activities are the optimization of supply chains, including the creation of joint ventures with neighboring countries, providing conditions for the creation of high-value-added products, improving production capacities, and taking into account the factor of decarbonization to reduce the impact of the Carbon border adjustment payment.

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Diversification Strategy and Good Governance: Does It Affect Firm’s Leverage?

Cited by 3 publications

References 64 publications

Corporate governance and its impact on strategy diversification and growth in the Saudi non-oil sector

Corporate governance and its impact on strategy diversification and growth in the Saudi non-oil sector

Leverage, Product Diversification, and Performance of Life Insurance Companies in Indonesia

Strategies to Diversify International Activity of Ukrainian Metallurgical Enterprises

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