The Effect of Diversification on the Financial Performance of the Manufacturing Companies of Tehran Securities Bourse.

Sheikh, Mohammad Javad; Zamani Gandomani, Mohsen; Mohajerani, Maryam

doi:10.22034/iaar.2014.104392

The Effect of Diversification on the Financial Performance of the Manufacturing Companies of Tehran Securities Bourse.

Document Type : Original Article

Authors

Mohammad Javad Sheikh

Mohsen Zamani Gandomani

Maryam Mohajerani

10.22034/iaar.2014.104392

Abstract

In the recent years, the relationship between financial performance and business diversity of companies is an important empirical subject in financial management. Strategies of business diversity can affect competitive capability of an industry. For a manager, there is nothing more important than the understanding of the business which is not limited to understanding the factors affecting the relationship between the businesses. Strategic thinking is the approach inviting the managers to learn immediately from the business environment and to use creativity for creating new values. The purpose of the present research is to assess the effects of business diversity strategy on financial performance of the companies listed at Tehran Stock Exchange. By using appropriate statistical tests, the paper tires to review the relationship between the two variables of “diversity” as the independent variable and “financial ratios” as the dependant variable. The dependant and independent variables are compared through using parametric tests including T test, K-S test, Kolmogorov–Smirnov’s nonparametric test and the Mann-Whitney U test. The gathered data of 8 financial periods are analyzed. The results obtained show that there is no relationship between business diversity and financial ratios.

Keywords

Diversity

performance

liquidity ratio

leverage ratio

efficiency ratio

profitability ratios