Open AccessProduct Line Diversification and Its Impact on Firm Performance
Author(s) -
Zia Ur Rehman,
Asad Khan,
Rafique Ahmed Khuhro,
Abdul Ghafoor Khan
Publication year - 2021
Publication title -
journal of applied economics and business studies
Language(s) - English
Resource type - Journals
eISSN - 2663-693X
pISSN - 2523-2614
DOI - 10.34260/jaebs.533
Subject(s) - diversification (marketing strategy) , profitability index , business , capitalization , market capitalization , industrial organization , line of business , finance , marketing , business model , stock market , business relationship management , electronic business , paleontology , linguistics , philosophy , horse , biology
The objective of the study is to measure product diversification’s impact on insurance firm’s financial performance in Pakistan. Analysis are carried out to examine how ownership structure, capitalization, group membership, firm size, diversification across business lines, industry concentration affects firm’s financial performance. Data from 2009-2019 is collected to measure the impact of diversification (entropy) on the risk- adjusted returns. Findings of the study reveal that business line diversification has strong positive effect on firm performance (for both ROA and ROE) which means that diversified firms perform better than non-diversified firms. For managers these findings are useful as they propose the need for diversification, capitalization, increase in size and group affiliation to enhance firm profitability.