The influence of the diversification degree and directivity on business risk
by Ryota Ishiai; Ling Feng; Masahiro Irie
Asian J. of Management Science and Applications (AJMSA), Vol. 2, No. 3, 2016

Abstract: One of main purposes of diversification strategy is to decrease the business risk by portfolio construction. In this case, since the unrelated diversification strategy differs in the performance variation pattern between business segments greatly, we think that business risk will be decreasing. We find that when RHI (an index of the degree of diversification) is less than 0.3, Dir (an index of the directivity of diversification we proposed) and business risk is in positive correlation. That is, when the degree of diversification is low, unrelated diversification will be effective in decreasing a business risk.

Online publication date: Fri, 25-Nov-2016

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