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The Effect of (Homogeneous/Heterogeneous) Diversification Strategy on Corporate Performance and Market risk

Author Affiliations

  • 1Deptt. of Business Administration (Finance), Qazvin Islamic Azad University, IRAN
  • 2 Deptt. of Accountancy, Faculty of Management and Accounting, IRAN

Res. J. Recent Sci., Volume 4, Issue (4), Pages 38-46, April,2 (2015)

Abstract

Diversification is regarded as a state of corporate strategy. Strategy of diversification (both homogeneous and heterogeneous ones) includes the mechanisms related to strategies and criteria of measuring corporate diversity. Thus, being aware of possible relationships has an influence on diversification of organizations and firmsí effectiveness and profitability. Organizationsí collective tendency, especially through adoption of managerial strategies, indicates that there seems to be no consideration for strategic decision-making from this viewpoint. For this reason, firms adopt different strategies such as homogenous and heterogeneous diversification for the sake of their growth and survival. The main objective of the present study is to investigate the effect of (homogenous and heterogeneous) diversification on corporate performance and stock market risk. Thus, a sample consisting of 68 Tehran Stock Exchange member companies during 2002-2011 was chosen using systematic screening elimination method and the model of analysis and interpretation of coefficients was estimated using regression model. Results of the present study show that there is no significant relationship between heterogeneous diversification and performance and systematic risk. In addition, there is a significant relationship between homogeneous diversification and performance and systematic risk.

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