Business group diversification, financial constraints and firm performance: the case of Tunisian group affiliated firms

Dorra Ellouze and Khadija Mnasri ()
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Dorra Ellouze: UMA - Université de la Manouba [Tunisie]
Khadija Mnasri: Université de Tunis, CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine

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Abstract: In this paper, we analyze the effect of business group diversification on firms' performance and we examine whether this effect is particularly relevant for financially constrained firms. We assess these relations using a unique hand-collected database of 67 Tunisian non-financial firms affiliated with business groups during the period of 1998–2016. We provide evidence that there is a quadratic U-shaped relationship between group diversification and firms' performance (measured by the return on assets and the Tobin's Q ratios), suggesting that group diversification enhances affiliated firms' performance only if it exceeds a certain threshold. Our results also show that a high level of business group diversification is particularly beneficial for firms that suffer financial constraints.

Date: 2020
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Citations: View citations in EconPapers (2)

Published in Journal of Management and Governance, 2020, 24 (1), pp.273 - 301. ⟨10.1007/s10997-019-09454-4⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02999646

DOI: 10.1007/s10997-019-09454-4

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