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International Diversification and Performance: Evidence from Singapore

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  • Lin Tongli
  • Er Ping
  • Winston Chiu

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    Abstract

    This study focuses on how international diversification affects a firm in terms of multiple performance measures (accounting-based, market-based, and intangible value creation). The study is unique as it uses segment data made available only recently, which enables the examination of both product and international diversification with performance. The period studied coincided with Singapore firms’ performance during the Asian Financial Crisis. In contrast to previous studies on Singapore, our results show that product diversification is negatively correlated to all measures of performance, while international market diversification is positively correlated. We attribute the difference to the time period which covers both upswings and downturns of the economy, unlike previous studies which considered only the former. Other control measures were incorporated; firm size is highly significant in explaining all measures of performance but not so for firm age, leverage, risk and industry. For top managers, we suggest that regardless of economic climate, the dominant diversification strategy is to take a focused approach to product diversification, but a broad approach to international diversification. Copyright Springer Science + Business Media, Inc. 2005

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    File URL: http://hdl.handle.net/10.1007/s10490-005-6418-4
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    Bibliographic Info

    Article provided by Springer in its journal Asia Pacific Journal of Management.

    Volume (Year): 22 (2005)
    Issue (Month): 1 (January)
    Pages: 65-88

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    Handle: RePEc:kap:asiapa:v:22:y:2005:i:1:p:65-88

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    Postal: P.O. Box 17, 3300 AA Dordrecht, the Netherlands
    Web page: http://www.springerlink.com/link.asp?id=106589

    Related research

    Keywords: product diversification; international diversification; firm performance;

    References

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    1. Karl V. Lins & Henri Servaes, 2002. "Is Corporate Diversification Beneficial in Emerging Market?," Financial Management, Financial Management Association, vol. 31(2), Summer.
    2. Denis, David J & Denis, Diane K & Sarin, Atulya, 1997. " Agency Problems, Equity Ownership, and Corporate Diversification," Journal of Finance, American Finance Association, vol. 52(1), pages 135-60, March.
    3. Merchant, Kenneth A. & Bruns, William Jr., 1986. "Measurements to cure management myopia," Business Horizons, Elsevier, vol. 29(3), pages 56-64.
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    Cited by:
    1. Mike Peng & Andrew Delios, 2006. "What determines the scope of the firm over time and around the world? An Asia Pacific perspective," Asia Pacific Journal of Management, Springer, vol. 23(4), pages 385-405, December.
    2. Asli Colpan, 2008. "Are strategy-performance relationships contingent on macroeconomic environments? Evidence from Japan’s textile industry," Asia Pacific Journal of Management, Springer, vol. 25(4), pages 635-665, December.
    3. Andreas Bausch & Frithjof Pils, 2009. "Product diversification strategy and financial performance: meta-analytic evidence on causality and construct multidimensionality," Review of Managerial Science, Springer, vol. 3(3), pages 157-190, November.
    4. Liu-Ching Tsai & Chaur-Shiuh Young & Hui-Wen Hsu, 2011. "Entrenched controlling shareholders and the performance consequences of corporate diversification in Taiwan," Review of Quantitative Finance and Accounting, Springer, vol. 37(1), pages 105-126, July.
    5. Xufei Ma & Xiaotao Yao & Youmin Xi, 2006. "Business group affiliation and firm performance in a transition economy: A focus on ownership voids," Asia Pacific Journal of Management, Springer, vol. 23(4), pages 467-483, December.
    6. Mingfang Li & Kannan Ramaswamy & Barbara Pécherot Petitt, 2006. "Business groups and market failures: A focus on vertical and horizontal strategies," Asia Pacific Journal of Management, Springer, vol. 23(4), pages 439-452, December.

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