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The Effect of Diversification on Firm Performance

Author

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  • Mark Rogers

    (Harris Manchester College, The University of Oxford and Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

This paper analyses the association between diversification and firm performance in a sample of up to 1449 large Australian firms (1994 to 1997). Firm performance is measured by profitability and, for quoted firms, market value. Results from the full sample show that more focused firms have higher profitability. This result controls for firm specific effects and other determinants of profitability. However, this association is not found in sub-sample regressions for listed firms. This is true both when either profitability or market value are used as a performance measure. The results may indicate that listed firms may be under closer scrutiny and competitive pressures that ensure, on average, that these firms are at their optimal degree of diversification.

Suggested Citation

  • Mark Rogers, 2001. "The Effect of Diversification on Firm Performance," Melbourne Institute Working Paper Series wp2001n02, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2001n02
    as

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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2001n02.pdf
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    References listed on IDEAS

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    Cited by:

    1. Christian Espinosa & Carlos Maquieira, 2010. "Diversificación y Desempeño en Sud América: Evidencia para Chile," Working Papers 10, Facultad de Economía y Empresa, Universidad Diego Portales.
    2. Christian Espinosa & Carlos Maquieira & Joao Paulo Vieito, 2012. "Does corporate diversication create value in south america? The chilean case," Working Papers 38, Facultad de Economía y Empresa, Universidad Diego Portales.
    3. Christian Espinosa & Juan Gorigoitía, 2012. "Stability of sovereign risk in the Eurozone through the Lyapunov Exponent," Working Papers 36, Facultad de Economía y Empresa, Universidad Diego Portales.
    4. A. Vijayakumar, 2009. "Determinants of Financial Structure of Corporate Sector in India- Some Empirical Evidence," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 34(4), pages 471-487, November.

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    More about this item

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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