Impact of Diversification on the Firm’s Performance: An Evidence from Pakistan

Abstract

This study analyzes the relation of diversification and the performance of Pakistani firms in a sample of 8 diversified and 8 undiversified listed firms of KSE-100 index from year 2004 to 2009. Firm Performance is measured by the Paneling data analysis. The results of the diversified and undiversified firm in regression analysis showed that there is no multi colinarity between the variables. Diversified firm are more risky than the undiversified firms, however, the diversified firms have higher leverage than undiversified strategic firms. So the undiversified firms have the greater returns due to the less proportion of the risk.

Keywords: diversification, performance, firm, risk, leverage, return on asset