Title: Firm performance and diversification: an empirical investigation of chemical sector in India

Authors: Santosh Kumar Sahu

Addresses: Madras School of Economics, Gandhi Mandapam Road, Kottur, Chennai, 600025, Tamil Nadu, India

Abstract: This paper attempts to understand the relationship between firm performance and diversification for the sample firms in the chemical sector in India. Using concentric index of diversification, this paper relates firm performance and diversification for the chemical sector. The results of this study indicate that, higher diversification leads to poorer performance as firms try to diversify into areas beyond their current scope. This paper further concludes that diversification is not a very good strategy to increase profits in the context of Indian chemical industries. Though diversification to some extent may give positive results but higher diversification leads to poor performance. The contribution of this work lies in identifying diversification for the chemical sector in India and compare with firm characteristics in general, and with the firm performance in particular.

Keywords: firm performance; diversification; Tobin's q; chemical industry; India.

DOI: 10.1504/IJSE.2017.080862

International Journal of Sustainable Economy, 2017 Vol.9 No.1, pp.56 - 71

Received: 11 Jan 2016
Accepted: 29 Jun 2016

Published online: 09 Dec 2016 *

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