Accounting & Marketing

A Comparative Study on Corporate Diversification and Firm Performance across South Asian Countries

Abstract

Ume Salma and Anwar Hussain

 This study has thoroughly studied the previous literature on corporate diversification and firm’s performance in different countries like, USA, EU, China, Malaysia and Bangladesh. To investigate the effects of different factors those affected the diversification decision/strategy of firms we have taken data of 465 firms from India, Sri Lanka and Pakistan in order to check how different factors affected the diversification decision of manufacturing firms across south Asian countries. Data was collected from financial statements of different firms and stock exchanges which is available at their websites and also from data banks. Present study is secondary in nature and 16-years data is collected from 2001 to 2016 of different firms. A two stage regression analysis is used with the dependent variable of “MAR, BOR SIZE GROW etc.”. Results showed that variables i.e., managerial ownership, director ownership, size, and grow, debt ratio and firm risk found significant association with corporate diversification and firm performance. It is evidence found that all these variables have significant impact on the corporate diversification and firm performance across south Asian countries. From whole study and results we can say that diversification is deployed as strategy to reduce firm specific business risk. The increased volatility and aggressiveness of the industry has made the industry more endangered to fluctuations in demand, thereby aggravating the situation and making survival more pivotal. In order to survive in such aggressive environment, manufacturing industries must have resonated strategic planning and management frameworks. A firm’s survival is dependent upon its ability to adjust successfully to the changing environment, whereas strategic planning and managerial capabilities are tools to survive in such challenging environment.