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Business group diversification, financial constraints and firm performance: the case of Tunisian group affiliated firms

Author

Listed:
  • Dorra Ellouze

    (UMA - Université de la Manouba [Tunisie])

  • Khadija Mnasri

    (Université de Tunis, CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)

Abstract

In this paper, we analyze the effect of business group diversification on firms' performance and we examine whether this effect is particularly relevant for financially constrained firms. We assess these relations using a unique hand-collected database of 67 Tunisian non-financial firms affiliated with business groups during the period of 1998–2016. We provide evidence that there is a quadratic U-shaped relationship between group diversification and firms' performance (measured by the return on assets and the Tobin's Q ratios), suggesting that group diversification enhances affiliated firms' performance only if it exceeds a certain threshold. Our results also show that a high level of business group diversification is particularly beneficial for firms that suffer financial constraints.

Suggested Citation

  • Dorra Ellouze & Khadija Mnasri, 2020. "Business group diversification, financial constraints and firm performance: the case of Tunisian group affiliated firms," Post-Print hal-02999646, HAL.
    • Handle: RePEc:hal:journl:hal-02999646
    DOI: 10.1007/s10997-019-09454-4
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    Cited by:

    1. Michal Karas & Mária Režòáková, 2021. "The role of financial constraint factors in predicting SME default," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 16(4), pages 859-883, December.
    2. Michal Karas & Mária Režòáková, 2023. "A novel approach to estimating the debt capacity of European SMEs," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 18(2), pages 551-581, June.

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