Search results

Geographic diversification results in the improvement of firm value through an increase in scale and scope of economies, gains in synergy, reduction in cost and improved corporate governance, however, the capabilities of financial institutions get heavily affected due to information asymmetries, varied macro and microeconomic factors across economies. In this context, the purpose of this paper is to empirically analyze the impact of geographical diversification on the performance of Indian Banks.

For an unbalanced panel data set of Indian Banks over the period 2001–2016, fixed effect model (FEM) with a distributed lag is used and tested for firm and time fixed effects. Further, the study also examines the role of bank size and ownership on the above association.

Findings of the study suggests that geographical diversification helps in increasing bank returns for the overall sample but does not have any significant impact on bank risk. For foreign and public banks, geographical diversification helps in increasing bank returns but does not have any significant impact on bank risk. This indicates toward the adverse selection, poor monitoring incentives in new markets and suggesting a lack of managerial skills.

The study indicates that while formulating the policies regarding branching and expansion these findings can serve as a guiding tool for managers and regulators. Findings have important implications for financial institution and policymakers in globalized financial markets.

This paper aims to examine the effect of geographical diversification on corporate liquidity in Malaysian firms. Liquidity is represented by both cash and working capital.

Data for this study is collected from a total of 735 firms over a period of five years, from 2010 to 2014, resulting in a total of 2,904 firm-year observations. The effect of geographical diversification on the cash and working capital of the firms is analyzed by using the ordinary least squares (OLS) with standard errors adjusted for firm level clustering and the quantile regression (QR) analyses. Control variables which represent the characteristics of the firms are also considered.

Analysis using the OLS regression technique indicates that geographical diversification has a highly significant positive influence on corporate cash holdings, while the influence of working capital is negative and its significance is only at the 10 per cent level. However, when QR is used to analyze the relationships, it is found that geographical diversification is only significant in positively influencing cash holdings for firms with low cash holdings, but the relationship is insignificant at high levels of cash holdings. Additionally, working capital is significantly influenced by geographical diversification at high levels of working capital but not at low levels.

To the author’s knowledge, this is the first study to analyze the influence of geographical diversification on liquidity by considering both cash and working capital. The effect of diversification on liquidity is mostly studied in developed countries, whereas this study is focused on a developing country. Additionally, this study uses QR to analyze relationships at different levels rather than at aggregate level as done in OLS regression analysis.

Uncertainties caused by political risks can drastically affect global supply chains. However, the supply chain management literature has thus far developed rather limited knowledge on firms' perception of and reactions to increased political risks. This study has two main purposes: to explore the relationship between extant risk exposure and perceived firm-specific political risk and to understand the impact of firm-specific political risk on firms' vertical integration and diversification strategies.

The authors developed a unique dataset for testing our hypotheses. Specifically, the authors sampled manufacturers (SIC20-39) listed in the United States from 2002 to 2019. The authors collected financial and diversification data from Compustat, vertical integration data from the Frésard-Hoberg-Phillips Vertical Relatedness Data Library and political risk data from the Economic Policy Uncertainty database. This data collection process yielded 1,287 firms (8,329 observations) with available data for analysis.

A two-way fixed-effect regression analysis of panel data revealed that firms tend to be more sensitive to political risk when faced with income stream uncertainty or strategic risk. By contrast, exposure to stock returns uncertainty does not significantly influence firms' sensitivity toward political risk. Moreover, firm-specific political risk is positively associated with vertical integration and product diversification. However, firm-specific political risk does not result in higher levels of geographical diversification.

This study joins the literature that systematically explores the antecedents and implications of firm-specific political risk, thus broadening the scope of supply chain risk management.

Previous work in international business largely disregards the interplay between home-country conditions and firms’ geographical diversification – implying that, regardless of indigenous conditions, firms can modify their domestic performance (which the authors measure in terms of change in firms’ domestic productivity) merely by diversifying into international markets. The authors contest this view and argue that diversification does not substitute for home-country conditions. Rather, it moderates the baseline impact of home-country conditions on indigenous firms’ domestic performance. The purpose of this study is to describe these mechanisms and empirically examine their implications for indigenous firms’ performance.

The authors investigate the above model based on a 20-year longitudinal analysis of 600 observations involving telecommunication incumbents from 65 countries. They control for possible reverse causality between firms’ international diversification (and other firm-specific factors) and their domestic performance, and conduct several robustness checks.

The authors find – as hypothesized – that international diversification moderates the baseline performance impact of different home-country attributes in different ways. Such diversification does not have a uniform moderating effect on home-country attributes. In other words, the baseline effects of home-country conditions are altered as indigenous firms become more internationalized.

Theoretically, this work bridges the micro- and macro-level arguments that interweave strands from the competitive strategy and national competitive advantage literatures. By unpacking diversification’s role vis-à-vis the effect of upstream (home-country) conditions on firm performance, the authors attempt to shed light on the mechanisms that help (or hinder) indigenous firms’ performance. Empirically, this study helps to reconcile seemingly opposite views about whether and, if so, how much home-country conditions shape indigenous firms’ expansion after they have diversified internationally.

Analyses data from the USA and UK to determine whether diversification within a region by property type is better than diversification between regions within a property type. Compares both strategies to full diversification by both property type and region. Calculates and compares property type and regional correlation matrices. Produces efficient frontiers and calculates principal components to determine if there are dominant property type or regional dimensions to real estate returns. Suggests that for the USA a purely retail portfolio diversified over all regions would have been almost as effective as a fully diversified portfolio. In the UK, there is less diversity across regions within retail property. Overall, there is no simple conclusion applicable to all regions and all property types in either country.

This study suggests two new diversification strategies, i.e., tourism-related and tourism-unrelated diversifications which are specifically applicable to the hotel firms. This study aims to investigate which diversification strategy has better benefits toward firm performance. This study includes a complete set of public listed firms of the hotel industry from four Asian countries, namely, Hong Kong, Singapore, China, and Malaysia, covering from years 2001 to 2012. Revealing the advantage and disadvantage of both diversification strategies, the empirical evidence regarding its influences on hotel firm performance are investigated in this study. This study finds a nonlinear relationship between degree of diversification and firm performance. Confronting with the volatile earnings when crises strike tourism sector, this study further shows how the crises affect the relationship between tourism-related/unrelated diversification strategy and hotel firm performance.

This study aims to examine how geographic diversification affects firms’ risk by introducing the franchising strategy as a moderator.

The panel regression analysis was conducted with a sample of US restaurant firms. Specifically, a two-way random (or fixed) effects model clustered by firm was used to test hypotheses.

Findings show that geographic diversification does not significantly affect restaurant firms’ risk. However, franchising aggravates the negative effect of geographic diversification on restaurant firms’ risk, which contradicts the traditional theories of franchising.

The results are expected to contribute to the diversification literature in the hospitality management by providing in-depth evidence for the effects of geographic diversification strategies on firms’ risk. Specifically, the study provides relevant theories for explaining the effect of geographic diversification in the restaurant context by examining franchising, a prominent strategy in the restaurant industry.

The results encourage restaurant firms to improve their managerial capability to react to changes in a geographically wider scope of markets and develop franchising contracts specifically to prevent misbehavior and moral hazard on the part of franchisees.

Considering the lack of research on the effect of geographic diversification on restaurant firms’ risk, this study examines not only the link between geographic diversification and firms’ risk but also a contingent factor, franchising.

The purpose of this paper is to theorize and empirically examine the effects of intra- and inter-regional geographic diversification on firm performance in China. Furthermore, it investigates they key firm capabilities, which moderate the relationships between intra- and inter-regional geographic diversification and firm performance.

In this research, the authors studied 366 listed companies that invest in mainland China. The authors used the Taiwan Economy Journal database to construct a panel data set from 2005 to 2014 and employed panel regression estimations as part of the empirical analyses.

The authors find that the effect of regional diversification on firm performance is significantly influenced by the contexts of the expansion. More specifically, the results show that the effect of intra-regional geographic diversification on firm performance takes the form of a U-shape relationship. In contrast, the authors find that inter-regional geographic diversification has a negative effect on firm performance. Firm marketing, research and development (R&D) and managerial capabilities moderate these relationships.

First, the companies studied in this research are mainly Taiwanese manufacturers with investments in mainland China. Second, the current model can be expanded by exploring additional process explanations and moderators in future research.

An important practical implication of this research is that when firms choose an intra-regional expansion strategy in China, they should adopt a moderate provincial diversification strategy in the invested region and reinforce its marketing capability to enhance firm performance. A careful consideration of a firm’s marketing, R&D and managerial capabilities is needed for successful regional diversification strategies in the China market.

The findings of this study contribute significantly to the existing literature on firms’ regional diversification. First, the authors explore and empirically test intra- and inter-regional geographic diversification strategies in China. The authors find that the effect of regional diversification on firm performance varies according to the contexts of the expansion (for instance, global, regional, in a single country). Second, this study furthers the research theme of intra- and inter-regional diversification by introducing and investigating previously unexplored firm capabilities as part of the framework.

Despite the increased level of national conflict around the world, outward foreign direct investment (FDI) targeting these areas has increased. This study aims to adopt a dynamic capability lens to examine the relationship between firm capabilities and the level of conflict in their FDI portfolio. The paper argues that conflict zones may be an attractive destination for a subset of firms, given their capability profile.

The authors draw from a sample of US Fortune 500 firms (2019) to examine their FDI destinations; specifically, they collected data on the locations of their foreign subsidiaries, which resulted into a final sample of 118 diversified US firms. The model was analyzed using ordinary least squares multiple regression to predict the extent to which their FDI portfolios have ongoing domestic and international conflict and the impact of expansion in such conflict-stricken markets on firm financial performance (ROA).

The authors find that firms with greater international geographical diversification capabilities, as depicted by their geographic spread, and those with greater local stock management capability, as depicted by their initial public offering maturity, are more likely to launch subsidiaries in high ongoing conflict zones. Furthermore, the authors find that while it may be unprofitable for firms to seek FDI in high-conflict zones, firms that operate in strategic industries (manufacturing, infrastructure, natural resource extraction) experienced positive performance. This can be attributed to the fact that firms operating in these sectors are more likely to directly profit in the reconstruction/rebuilding of such conflict-stricken markets.

While previous literature focused on macro-level factors, this study sought to highlight firm-level factors that determine FDI decision in conflict zones. The authors capture different dimensions/sources of firms’ dynamic capability, one resulting from foreign experience (i.e. geographic diversification) and the other from local experience (i.e. domestic stock management) to assess how each correlate with multinational corporations’ level of conflict in their FDI portfolio. Furthermore, the authors contribute to the understanding of the relationship between expansion in conflict zones and firm performance and highlight that industry does matter. Implications from this study highlight the importance of building risk management capabilities to handle not just expansion in conflict zones but also during challenging times like those brought about by pandemics.

The purpose of this research is to examine the effects of corporate diversification on earnings management.

Based on listed firms regarding non-financial sector of Pakistan, the study runs mean comparison test along with panel least squares regression analysis.

The results of the study suggested that locally diversified firms and combination of industrial and geographical diversified firms mitigate earnings management. In support of the earnings equalizing hypothesis, managers of diversified firms have less need for accruals management because diversified firms had more free cash flows which naturally reduces earnings variability. This study also found that diversified firms had no informational asymmetry problems which reject the asymmetric information hypothesis. In addition, debt ratios are also associated with large organizations, but it shows that the more debt ratios are negatively associated with earnings management. Mean comparison test is also conducted, but the results are same as the regression results which does not confirm asymmetric information hypothesis.

Different business segments are affected by the world financial crisis in 2008. Because of those financial shocks, the diversified firms are affected more. In future studies, results will become more favorable in context of diversified firms.

The main function of earnings management is to make up the company for investors point of view to look healthier than it really is. But it may cause to disappointment for investors regarding loss of investment. It shows future projections of the company and has vital importance for investor’s perspective.

The misallocation of resources caused by earnings management refers to the value loss for society. Because the misallocation of funds will make that particular segment or division more vulnerable which ultimately make shareholders to go for entrenchment or liquidation. At the end, un-employment rises after entrenchment or liquidation and the society suffers.

This research makes an important contribution to the accounting and management literature by providing new and significantly different evidences on the relative roles of corporate diversification and earnings management.