EconPapers    
Economics at your fingertips  
 

Does the Method of Corporate Diversification Matter to Firm’s Performance?

Ling-Foon Chan, Bany-Ariffin An and Annual Bin Md Nasir

A chapter in Asia-Pacific Contemporary Finance and Development, 2019, vol. 26, pp 207-233 from Emerald Publishing Ltd

Abstract: Abstract Corporate diversification is a strategy that enables corporations to expand their core business into other businesses. In Malaysia, corporate diversification continues to represent a fundamental organizational structure. Some two-thirds of Malaysian firms are diversified. However, when compared to developed countries such as the US and the UK, we find that firms are moving toward non-diversification. The study is based on the population framework consisting of all of the public limited companies (PLCs) listed on the Bursa Malaysia stock exchange from 2007 to 2012. A dynamic panel model system generalized method of moments (GMM) was used to analyze the diversification and firm’s performance theories.The empirical findings demonstrated that diversification is better than non-diversification firms for the curvilinear relationship between diversification and firm’s performance (ROA and Tobin-Q) when using the entropy index and relatedness is taken into consideration. The research further concluded that related and unrelated diversification also has a positive relationship with performance, but diversification must be the dominant (focused) and cannot be too broad in nature. Diversification that is too broad may cause a positive relationship to turn in to a negative relationship toward performance in both related and unrelated instances of diversification.

Keywords: diversification; performance; related; unrelated; curvilinear; GMM; Tobin-; Q; entropy; relatedness (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.emeraldinsight.com/10.1108/S1571-038620 ... RePEc&WT.mc_id=RePEc (text/html)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:isetez:s1571-038620190000026011

Ordering information: This item can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
http://www.emeraldgr ... ies.htm?id=1571-0386

Access Statistics for this chapter

More chapters in International Symposia in Economic Theory and Econometrics from Emerald Publishing Ltd
Bibliographic data for series maintained by Charlotte Maiorana ().

 
Page updated 2022-09-07
Handle: RePEc:eme:isetez:s1571-038620190000026011