Diversification Strategy and Performance in Automotive Firms in Asean Countries

Abstract

Diversification strategy has been subjected to extensive research among strategic management and finance scholars. This study examines the effect of diversification strategy and performance in public listed automotive manufacturing firms in Asean countries using return on invested capital as a proxy of performance. The study uses panel data analysis for a sample of 28 Aseans' firms during the period 2007 to 2014 based on quarterly reporting data provided by Bloomberg database. The evidence produces interesting findings that related diversification has a significant effect on performance. In the meantime, several other variables show positive impact too. Therefore, automotive manufacturing firms should solely diversify around their core business to maintain their performance. Nevertheless, difference measures of performance should be adopted to check on consistency of the results.

The impacts of diversification strategy on the financial performance of insurers

“…In fact, firms' sales details are categorized using the classification system, which easily measures corporate diversification (Montgomery, 1982). Although some of the researchers have used this method of diversification measurement in the literature , Wang et al 2019, Daud et al 2018, Bayramov and Abbas 2017, Kapaya et al 2017), this method is not free from limitations. Martin and Sayrak (2003) argue that the SIC method for measuring corporate diversification cannot capture the distribution or relative significance of firms' involvement in each specific segment of an industry.…”