SOURCE:

Faculty: Management Sciences
Department: Accountancy

CONTRIBUTORS:

Ezenwafor, E. C.
Osisioma, B. C.
Okoye, E. I.

ABSTRACT:

This study sought to evaluate the effect of corporate diversification on financial performance of quoted firms on Nigeria Stock Exchange. Specifically, the study: evaluate the effect of foreign diversification, business subsidiary diversification, product diversification, income diversification, firm size on return on financial performance measures of Return on Asset (ROA) for the period 2007-2017. Ex-post facto research design was adopted for the study. A sample of 41 manufacturing companies was randomly selected from a population of 119 manufacturing companies quoted on the Nigerian Stock Exchange. Data for the study were obtained from the annual reports and accounts of the sampled companies. Correlation and Ordinary Least Square regression analysis were used to test the formulated hypotheses with the aid of SPSS version 20.0. Based on this, the study revealed that the dual variables of foreign diversification and business subsidiary diversification strategies were seen to produce insignificant relationship with the measure of firm performance (ROA). Product diversification showed negative but significant relationship while income diversification strategies produced positive and significant relationship with the measure of firm performance (ROA) during the period under analysis. However, the policy implication from these findings suggests that, most firms do employ the wrong combination of strategies in the process of diversifying its business. We therefore recommended among other things that management policies should be geared towards encouraging product and income diversification strategies which will go a long way to boost market value of the firm.