The impact of corporate diversification on firm value 
in Kenya

Manyuru, Anthony; Wachira, Muturi; Amata, Evans Ombima

doi:10.5897/ajbm2017.8275

Cited by 6 publications

(5 citation statements)

References 36 publications

(46 reference statements)

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“…To begin with, financial performance as a dependent variable was measured using the modified Tobin's q formula by (Chung & Pruitt, 1994). Empirically, this indicator had been used by related studies like those by (Phung & Mishra, 2016), (Manyuru et al, 2017) and (Saleh et al, 2017). Secondly, institutional ownership as a predictor variable was measured after the approach by (Saleh et al, 2017).…”

Section: Resultsmentioning

confidence: 99%

“…Contrary to this, corporate diversification has been found to negatively relate to firm performance in Croatia (Pavić & Pervan, 2010) and Vietnam (Phung & Mishra, 2016). Other studies have reported nonlinear relationships (Elango, Ma, & Pope, 2008) while some puts forth no relationship between corporate diversification and firm performance as evident from Pakistan (Iqbal, Hameed, & Qadeer, 2012), Italy, Netherlands (Akpinar & Yigit, 2016) and Kenya (Manyuru, Wachira, & Amata, 2017). From an institutional ownership perspective, there exists a positive link with corporate diversification (Gharbi & Jarboui, 2017).…”

Section: Introductionmentioning

confidence: 95%

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Effect of Institutional Ownership on Financial Performance in Kenya: Moderated Mediation Role of Capital Structure and Corporate Diversification

Tanui¹

2021

JAREAS

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Purpose: The study aimed at examining the moderating effect of capital structure in the indirect relationship between institutional ownership and financial performance through corporate diversification of listed firms at the Nairobi securities in Kenya. Approach/Methodology/Design: Post positivist research paradigm and explanatory research design guided the study in which 35 listed firms from 2003 to 2017 were included. Findings: There was a significant interaction effect between capital structure and institutional ownership on financial performance through corporate diversification. The study extended market power theory by examining institutional ownership structure given that corporate diversification is not only a source of power to drive a firm’s performance. Practical Implications: Institutional investors provide equity capital that is collaborated with the firm’s capital structure. As a result, there exist sufficient resources to take on diversification strategy despite this translating to a smaller amount in terms of financial performance. The study had implications on Market timing theory which opines that market timing is a ‘first order determinant’ to aid in selecting a suitable form of financing given debt and equity. Ideally, the preferences of different owners in the firm would affect the choice between debt and equity financing. Originality/value: Investigation of the interaction effect between capital structure and institutional ownership on financial performance through corporate diversification.

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Section: Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 95%

Effect of Institutional Ownership on Financial Performance in Kenya: Moderated Mediation Role of Capital Structure and Corporate Diversification

Tanui¹

2021

JAREAS

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“…They provide a real advantage for both the business itself and the state. Indeed, in this way, the state can make certain decisions, acting not only as a guarantor of transactions but also as a tool for regulating the financial stability of acquired and expanding organizations, for the prosperity and growth of the countries' economic system in general (Manyuru et al, 2017).…”

Section: Discussionmentioning

confidence: 99%

Diversification and company sales efficiency: Synergy influence on business valuation

Wang,

Abdullayeva,

Hoang

2023

Manage Decis Econ

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The purpose is to show the main methods of calculation and analysis of various organizations' indicators to demonstrate, using a practical example, the synergistic effect's significance and role in the diversification and a rise in sales when making M&A (mergers and acquisitions) transactions. The methods applied are mathematical formulas and various empirical and statistical data from various literature sources. The study's findings underscore the importance of understanding the synergistic effect of M&A. The research results can be valuable for corporate executives, investors, and business consultants involved in M&A.

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“…This strategy has been referred to as the diversification puzzle in the literature and is yet to be resolved for both academics and business practitioners (Mushtaq Hussain Khan et al 2016, Heathcote and Perri 2013, Statman 2004. While some studies highlighted the financial benefits of diversification strategies for firms (Schommer et al 2019, Bhatia and Thakur 2018, Pandya and Rao 1998, Lang and Stulz 1994, others have criticized different forms and dimensions of these strategies (Peng and Lian 2020, Duho et al 2019, Morris et al 2017, Manyuru et al 2017, Kim and Mathur 2008, Wan 1998. Some scholars have even used the term "di-worsification" (Hobson 2019, Lhabitant and Vicin 2004, Franco 2004 to refer to the situation where this strategy exacerbates firms' financial performance.…”

Section: List Of Tablesmentioning

confidence: 99%

“…Even though a large number of researchers in management, economics and finance disciplines are considerably optimistic about the benefits of diversification (Schommer et al 2019, Bhatia and Thakur 2018, Benito Osorio et al 2012, Pandya and Rao 1998, Lang and Stulz 1994, some other scholars have strongly criticized different forms and dimensions of diversification strategy (Peng and Lian 2020, Duho et al 2019, Morris et al 2017, Manyuru et al 2017, Kim and Mathur 2008, Wan 1998. Diversification is even called "di-worsification" by some literature (Franco L.G.…”

Section: Dominant Theories Underpinning the Diversification Strategy ...mentioning

confidence: 99%

The impacts of diversification strategy on the financial performance of insurers

Shojaei¹

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The thesis examines the impacts of diversification strategy on the financial performance of firms in the insurance industry. It investigates the impacts of different dimensions of the diversification strategy, including product, geographic, staff, and technological diversification, on insurers' financial performance while considering some essential control variables such as type, size, age, and ownership structure of the companies. The research measures financial performance with the return on equity (ROE) and the return on assets (ROA). The thesis employs the mixed methods research methodology using qualitative and quantitative data collected from Iranian insurance companies, while the data is analysed quantitatively. Two separate studies are conducted to evaluate the impacts of different dimensions of diversification strategy on firms' financial performance. Specifically, the first study focuses on the impact of technological diversification strategy on a firm's financial performance. This study uses the primary data associated with technological diversification through a questionnaire survey with managers from 31 Iranian insurance companies, as the data for technological diversification is not available as secondary data. The data associated with firms' financial performance is collected from reports annually published by the Central Insurance of Iran. Employing the Structural Equation Modelling method enabled by Smart PLS 3 software to analyse the primary data, the study reports mixed effects of technological diversification on the financial performance of Iranian insurers. The second study focuses on investigating the impacts of product, geographic and staff diversification strategies on the financial performance of Iranian insurers. This study employs secondary data collected from the annual reports of the Central Insurance of Iran (from 2011 to 2020). Using econometric techniques for panel data (e.g., fixed effects) enabled by EViews 10 software, the study finds some 3 significant impacts of different dimensions of diversification strategy on the financial performance of Iranian insurers. This thesis is novel in several ways. First, it uses new measurement methods for different dimensions of the diversification strategy, specifically for product diversification and technological diversification. Second, this is the first study in diversification-firms' financial performance literature that combines all four dimensions in a single study. Third, this research benefits from different theoretical perspectives to synthesise the literature and interpret the findings. Therefore, the thesis is not bound or biased to any single theoretical lens. Finally, it provides robust and comprehensive findings for both researchers and practitioners in the insurance industry.

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The impact of corporate diversification on firm value in Kenya

Cited by 6 publications

References 36 publications

Effect of Institutional Ownership on Financial Performance in Kenya: Moderated Mediation Role of Capital Structure and Corporate Diversification

Effect of Institutional Ownership on Financial Performance in Kenya: Moderated Mediation Role of Capital Structure and Corporate Diversification

Diversification and company sales efficiency: Synergy influence on business valuation

The impacts of diversification strategy on the financial performance of insurers

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