Product Line Diversification and Its Impact on Firm Performance

Authors

  • Zia ur Rehman Assistant Professor Department of Management Sciences, University of Haripur, Pakistan
  • Asad Khan Lecturer, Department of Management Sciences, University of Haripur, Pakistan
  • Rafique Ahmed Khuhro Assistant Professor, Department of Management Sciences, University of Haripur, Pakistan
  • Abdul Ghafoor Khan Lecturer, Department of Management Sciences, Comsats University, Abbottabad Campus

DOI:

https://doi.org/10.34260/jaebs.533

Keywords:

Product-line Diversification, Firm Performance, Return on Equity, Return on Assets

Abstract

The objective of the study is to measure product diversification’s impact on insurance firm’s financial performance in Pakistan. Analysis are carried out to examine how ownership structure, capitalization, group membership, firm size, diversification across business lines, industry concentration affects firm’s financial performance. Data from 2009-2019 is collected to measure the impact of diversification (entropy) on the risk- adjusted returns. Findings of the study reveal that business line diversification has strong positive effect on firm performance (for both ROA and ROE) which means that diversified firms perform better than non-diversified firms. For managers these findings are useful as they propose the need for diversification, capitalization, increase in size and group affiliation to enhance firm profitability.

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Published

2021-09-30

How to Cite

Rehman, Z. ur, Khan, A., Khuhro, R. A., & Khan, A. G. (2021). Product Line Diversification and Its Impact on Firm Performance. Journal of Applied Economics and Business Studies, 5(3), 43-58. https://doi.org/10.34260/jaebs.533