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Moderating role of productivity on diversified conglomerates and performance: the case of Malaysia

Purpose – The purpose of this paper is to investigate the previous mixed findings in the relationship between diversification and firm performance. Using international and industrial conglomerates, the paper introduces productivity as a moderating variable to ascertain whether the mixed views in t...

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Main Author: Alex, Kwaku Gyan
Format: E-Article
Language:English
Published: Emerald Group Publishing Ltd. 2017
Subjects:
HB Economic Theory
Online Access:http://ir.unimas.my/id/eprint/17375/1/Moderating%20role%20of%20productivity%20%28abstract%29.pdf
http://ir.unimas.my/id/eprint/17375/
http://www.emeraldinsight.com/1757-4323.htm
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spelling my.unimas.ir.173752017-10-03T01:00:52Z http://ir.unimas.my/id/eprint/17375/ Moderating role of productivity on diversified conglomerates and performance: the case of Malaysia Alex, Kwaku Gyan HB Economic Theory Purpose – The purpose of this paper is to investigate the previous mixed findings in the relationship between diversification and firm performance. Using international and industrial conglomerates, the paper introduces productivity as a moderating variable to ascertain whether the mixed views in the diversificationperformance nexus is due to variations in productivity. The findings in both proxies of performance (q and return on asset (ROA)) show that productivity is not a significant moderator in the diversificationperformance link, except that under industrial conglomerates productivity enhances ROAs significantly. Meanwhile, the results show that diversification either has no significant value on firm performance or relates negatively with performance – a contrasting result to the hypothesis of this study. Design/methodology/approach – This study adopts diversification measurement, categorisation approach and the methodology used in the work of Fauver et al. (2004) and the subsequent modification by Lee et al. (2012). This study, however, investigates themoderating effect of productivity on diversified firms and not ownership as shown in the previous studies. Performance is measured by two proxies to show robustness of the study. ROA is an accounting tool and Tobin’s q reflects a market-based performance of the firm. Findings – The results show that productivity has no moderating impact on a market-based performance of a diversified firm. Regarding ROA, results show a split in finding by showing that productivity has no significant impact on international diversification; however, for industrial diversification, results show significant impact. Originality/value – The paper adds to knowledge of finance by ruling out the view that the inconsistencies in the diversification and performance nexus in emerging economies could be due to vagaries in productivity. It is confirmed that productivity technically does not strengthen the link between diversification and performance: suggesting that factors other than productivity could establish a maximal impact on that link to minimise the inconsistencies in the findings on diversification-performance link. Emerald Group Publishing Ltd. 2017 E-Article PeerReviewed text en http://ir.unimas.my/id/eprint/17375/1/Moderating%20role%20of%20productivity%20%28abstract%29.pdf Alex, Kwaku Gyan (2017) Moderating role of productivity on diversified conglomerates and performance: the case of Malaysia. Asia-Pacific Journal of Business Administration, 9 (2). pp. 118-133. ISSN 1757-4323 http://www.emeraldinsight.com/1757-4323.htm DOI 10.1108/APJBA-08-2016-0084
institution Universiti Malaysia Sarawak
building Centre for Academic Information Services (CAIS)
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaysia Sarawak
content_source UNIMAS Institutional Repository
url_provider http://ir.unimas.my/
language English
topic HB Economic Theory
spellingShingle HB Economic Theory
Alex, Kwaku Gyan
Moderating role of productivity on diversified conglomerates and performance: the case of Malaysia
description Purpose – The purpose of this paper is to investigate the previous mixed findings in the relationship between diversification and firm performance. Using international and industrial conglomerates, the paper introduces productivity as a moderating variable to ascertain whether the mixed views in the diversificationperformance nexus is due to variations in productivity. The findings in both proxies of performance (q and return on asset (ROA)) show that productivity is not a significant moderator in the diversificationperformance link, except that under industrial conglomerates productivity enhances ROAs significantly. Meanwhile, the results show that diversification either has no significant value on firm performance or relates negatively with performance – a contrasting result to the hypothesis of this study. Design/methodology/approach – This study adopts diversification measurement, categorisation approach and the methodology used in the work of Fauver et al. (2004) and the subsequent modification by Lee et al. (2012). This study, however, investigates themoderating effect of productivity on diversified firms and not ownership as shown in the previous studies. Performance is measured by two proxies to show robustness of the study. ROA is an accounting tool and Tobin’s q reflects a market-based performance of the firm. Findings – The results show that productivity has no moderating impact on a market-based performance of a diversified firm. Regarding ROA, results show a split in finding by showing that productivity has no significant impact on international diversification; however, for industrial diversification, results show significant impact. Originality/value – The paper adds to knowledge of finance by ruling out the view that the inconsistencies in the diversification and performance nexus in emerging economies could be due to vagaries in productivity. It is confirmed that productivity technically does not strengthen the link between diversification and performance: suggesting that factors other than productivity could establish a maximal impact on that link to minimise the inconsistencies in the findings on diversification-performance link.
format E-Article
author Alex, Kwaku Gyan
author_facet Alex, Kwaku Gyan
author_sort Alex, Kwaku Gyan
title Moderating role of productivity on diversified conglomerates and performance: the case of Malaysia
title_short Moderating role of productivity on diversified conglomerates and performance: the case of Malaysia
title_full Moderating role of productivity on diversified conglomerates and performance: the case of Malaysia
title_fullStr Moderating role of productivity on diversified conglomerates and performance: the case of Malaysia
title_full_unstemmed Moderating role of productivity on diversified conglomerates and performance: the case of Malaysia
title_sort moderating role of productivity on diversified conglomerates and performance: the case of malaysia
publisher Emerald Group Publishing Ltd.
publishDate 2017
url http://ir.unimas.my/id/eprint/17375/1/Moderating%20role%20of%20productivity%20%28abstract%29.pdf
http://ir.unimas.my/id/eprint/17375/
http://www.emeraldinsight.com/1757-4323.htm
_version_ 1644512604290285568
score 13.211869

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