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.
Chan, L.-F., AN, B.-A. and Nasir, A.B.M. (2019), "Does the Method of Corporate Diversification Matter to Firm’s Performance?", Asia-Pacific Contemporary Finance and Development (International Symposia in Economic Theory and Econometrics, Vol. 26), Emerald Publishing Limited, Bingley, pp. 207-233. https://doi.org/10.1108/S1571-038620190000026011
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