Corporate Diversification and Financial Performance of Listed Firms in Kenya: Does Firm Size Matter?

Tanui, Peninah Jepkogei; Serebemuom, Bramwel Murgor

doi:10.47631/jareas.v2i2.235

Cited by 9 publications

(9 citation statements)

References 16 publications

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“…In contrast to the stated studies, Becker et al [49] found a negative association between a firm's size and the profitability margins of U.S. manufacturing firms from 1987 to 2002. From a strategy perspective, firm size may be an indicator of diversification, which by and large has been found to affect performance negatively [50]. Studies in the literature have shown a mixed firm size and profitability relationship.…”

Section: Characteristics Of Firmsmentioning

confidence: 99%

Examining the Effect of Tax Reform Determinants, Firms’ Characteristics and Demographic Factors on the Financial Performance of Small and Micro Enterprises

2022

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Taxation is a powerful tool to achieve sustainable development goals (SDG) as tax policies help strengthen economic growth and improve revenue capacity. So, after tax reform, it is vital to analyze their impact on the performance of enterprises. Keeping in mind the SDG, the present study was conducted in India after the major tax overhaul—Goods and Service Tax (GST) on 1 July 2017, to measure the impact on Return on Equity (ROE) and Return on Investment (ROI) as they are the barometers to measure performance (DuPont Analysis). We opted for tax reform determinants, the characteristics of firms, demographic variables, and drivers from DuPont analysis to conduct the research, as all these variables can help identify the different causes of factors impacting ROI and ROE among different types of firms and demographics across countries. An econometric analysis of 546 registered SMEs (small and micro enterprises) was conducted using the regression model, structured equation modeling, and exploratory and confirmatory factor analysis to achieve the objectives. The empirical findings highlighted that a firm’s size, turnover, and DuPont analysis drivers (earnings × asset to sales × asset turnover) positively enhanced the ROI and ROE. Further, the change in the tax system after the tax reforms has enabled the detection of tax fraud and wrong invoices, reducing the missing insolvent traders and increasing the working capital flow of the firms, which in turn has augmented financial performance.

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Section: Characteristics Of Firmsmentioning

confidence: 99%

Examining the Effect of Tax Reform Determinants, Firms’ Characteristics and Demographic Factors on the Financial Performance of Small and Micro Enterprises

2022

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“…However, the prior studies have ignored the impact of group size and product portfolio diversification on CSR engagement, exposing the firms to various stakeholder demands and social issues and forcing the firms to build a social reputation through CSR spending. The prior literature has focused mainly on the impact of corporate diversification on financial performance (Doaei et al, 2014;Doaei et al, 2012;Lee & Jang, 2007;Tanui & Serebemuom, 2021). However, few studies concentrated on the cross-country diversification of business (Brammer et al, 2006;Strike et al, 2006).…”

Section: Introductionmentioning

confidence: 99%

CSR Spending in India: Exploring the Linkages With Business Group Affiliation and Product Portfolio Diversification

Potharla

Dissanayake

Amirishetty³

2023

AFL

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The present study aims to examine the influences of group affiliations status on the CSR spending of a firm and also to test how the group size and interaction of group size and product portfolio diversification influences the CSR spending. The sample of the present study covers 1,513 Indian firms coming under the ambit of CSR reporting, represented through the unbalanced panel data set of 4,459 firm-years from the year 2014 to 2019. The baseline model regresses CSR spending on the group affiliation status and set of controlling variables which are having the impact on CSR spending by using panel least squares regression model. The baseline model is extended to test the impact of group size and interaction of group size and product portfolio diversification on the CSR spending. Industry variations with regard to CSR spending are controlled by introducing industry fixed effects into the regression model. The findings of the study reveal significant positive impact of group affiliation status on CSR spending. The results are also robust to the group size effect and the interaction effect of group size and product portfolio diversification. The findings are supporting stewardship theory and socio—emotional wealth creation view of the group affiliated firm which asserts that group affirms experience variety of stakeholder demands and social issues. Building social reputation through CSR activities will be helpful in handling such situations. The findings also proved that larger group firms with wider product diversification are more encouraged towards CSR spending. This is the first study which tests the impact of group size and also the interaction of group size and product portfolio diversification on CSR spending. The study contributes to the literature on how the ownership style, especially, group affiliation status, influences the social engagement of a firm

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“…Diversification is one of the important corporate strategies used for growth and expansion by firms (Oladimeji and Udosen 2019, Capar and Kotabe 2003, Ansoff 1957). The research on how various diversification strategies affect firms' financial performance has been an attractive topic in strategic management, international business, economics and finance disciplines for several decades (Tanui and Serebemuom 2021, Aivazian et al 2019, Peng et al 2017, Ibrahim and Kaka 2007, Grant et al 1988. Accordingly, there are different definitions of diversification strategy in business and management literature.…”

Section: Acknowledgementsmentioning

confidence: 99%

“…However, due to the availability of data in this thesis, the first definition will be used. Hitt et al (1997), Chang and Wang (2007), Kim and Mathur (2008), Schmid and Walter (2012), Krivokapic et al (2017), Tsai et al (2020) and Tanui and Serebemuom (2021) are among the scholars who have studied the relationship between geographic diversification and firms' performance, and their findings have been mixed and inconsistent. Lin et al (2006) believe that technological diversification is the extent to which a company diversifies its technological capabilities in relevant or irrelevant technological areas.…”

Section: Research Questions and Research Objectivesmentioning

confidence: 99%

“…There is a substantial body of literature that examines the relationship between diversification strategies and the financial performance of firms in different disciplines and contexts (Grant et al 1988, Ibrahim and Kaka 2007, Kahloul and Hallara 2010, Peng et al 2017, Tanui and Serebemuom, 2021. This form of competitive strategy has been even called the "diversification puzzle" in the literature, as it is still unresolved for both academic and business practitioners (Statman 2004, Heathcote and Perri 2013, Mushtaq Hussain Khan et al 2016.…”

Section: The Diversification Strategies and A Firm's Financial Perfor...mentioning

confidence: 99%

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The impacts of diversification strategy on the financial performance of insurers

Shojaei¹

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The thesis examines the impacts of diversification strategy on the financial performance of firms in the insurance industry. It investigates the impacts of different dimensions of the diversification strategy, including product, geographic, staff, and technological diversification, on insurers' financial performance while considering some essential control variables such as type, size, age, and ownership structure of the companies. The research measures financial performance with the return on equity (ROE) and the return on assets (ROA). The thesis employs the mixed methods research methodology using qualitative and quantitative data collected from Iranian insurance companies, while the data is analysed quantitatively. Two separate studies are conducted to evaluate the impacts of different dimensions of diversification strategy on firms' financial performance. Specifically, the first study focuses on the impact of technological diversification strategy on a firm's financial performance. This study uses the primary data associated with technological diversification through a questionnaire survey with managers from 31 Iranian insurance companies, as the data for technological diversification is not available as secondary data. The data associated with firms' financial performance is collected from reports annually published by the Central Insurance of Iran. Employing the Structural Equation Modelling method enabled by Smart PLS 3 software to analyse the primary data, the study reports mixed effects of technological diversification on the financial performance of Iranian insurers. The second study focuses on investigating the impacts of product, geographic and staff diversification strategies on the financial performance of Iranian insurers. This study employs secondary data collected from the annual reports of the Central Insurance of Iran (from 2011 to 2020). Using econometric techniques for panel data (e.g., fixed effects) enabled by EViews 10 software, the study finds some 3 significant impacts of different dimensions of diversification strategy on the financial performance of Iranian insurers. This thesis is novel in several ways. First, it uses new measurement methods for different dimensions of the diversification strategy, specifically for product diversification and technological diversification. Second, this is the first study in diversification-firms' financial performance literature that combines all four dimensions in a single study. Third, this research benefits from different theoretical perspectives to synthesise the literature and interpret the findings. Therefore, the thesis is not bound or biased to any single theoretical lens. Finally, it provides robust and comprehensive findings for both researchers and practitioners in the insurance industry.

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Corporate Diversification and Financial Performance of Listed Firms in Kenya: Does Firm Size Matter?

Cited by 9 publications

References 16 publications

Examining the Effect of Tax Reform Determinants, Firms’ Characteristics and Demographic Factors on the Financial Performance of Small and Micro Enterprises

Examining the Effect of Tax Reform Determinants, Firms’ Characteristics and Demographic Factors on the Financial Performance of Small and Micro Enterprises

CSR Spending in India: Exploring the Linkages With Business Group Affiliation and Product Portfolio Diversification

The impacts of diversification strategy on the financial performance of insurers

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