Corporate Diversification and Risk: Portfolio Effects and Resource Redeployability

By analogy with portfolio diversification by stock market investors, managers and researchers have often expected that firms that spread operations across product or geographic markets reduce risk. However, numerous exploratory studies in corporate strategy and in international business have not been able to robustly confirm this expectation. This study develops a formal model to scrutinize implications of corporate diversification for corporate risk. The model incorporates the key distinction of corporate diversification, economies of scope, that qualifies the analogy between corporate and portfolio diversification. The presence of a particular type of economies of scope, resource redeployability, not only inherently increases risk but it can also raise risk over the level in undiversified firms. The model uses determinants of resource redeployability from previous research to derive conditions with which corporate diversification enhances risk. The developed elaborate operationalization of corporate risk should facilitate future research and help corporate managers.

Corporate Diversification, Ownership, and Solvency in China’s Property-Liability Insurance Companies

Solvency is the premise of the sustainable management of insurance companies. Among factors that affect the solvency of insurance companies, diversification strategy is one that cannot be ignored. To study the impact of diversification on the solvency of property-liability insurance companies and how diversification will influence companies with different ownership, this paper adopts the dynamic panel GMM model and the unbalanced panel data from 2009 to 2015. The analysis is from two dimensions: product diversification and geographic diversification. Empirical study shows that product diversification will increase the solvency of Chinese-funded property-liability insurance companies but reduce the solvency of foreign-funded ones. As for the impact of geographic diversification on solvency, the more geographically diversified the premium income of Chinese-funded property-liability insurance companies are, the lower their solvency will be. However, geographical expansion has no significant solvency-related impact on foreign-funded property-liability insurance companies in China.

Examining the Research on Business Information-Entropy Correlation in the Accounting Process of Organizations

Open business organizations, where information flows, is shared, and exchanged, are more prepared to adapt and survive chaos, uncertainty, and entropy, so they will be more predisposed to change management. The aim of this study is to analyze research trends at the international level on business information–entropy correlation in the accounting process of organizations. Mathematical and statistical techniques were applied to 980 articles during the period 1974–2020, obtaining results on the scientific productivity of the driving agents of this topic: authors, research institutions, countries/territories, and journals. Five lines of research were identified during the period analyzed, which mainly study information theory, maximum entropy, information entropy, decision-making, and enthalpy. Future research should focus on analyzing the evolution of this topic, which forms new thematic axes related to bitcoin market efficiency, business hierarchy information, business model evaluation systems, catastrophic economic collapse, corporate diversification, CSR reports affecting accounting conservatism, economic income accounting, and information loss. Currently, the research presents an upward trend, which allows a growing interest in the subject to be deduced in the academic and scientific community worldwide.

Effect of Institutional Ownership on Financial Performance in Kenya: Moderated Mediation Role of Capital Structure and Corporate Diversification

Purpose: The study aimed at examining the moderating effect of capital structure in the indirect relationship between institutional ownership and financial performance through corporate diversification of listed firms at the Nairobi securities in Kenya. Approach/Methodology/Design: Post positivist research paradigm and explanatory research design guided the study in which 35 listed firms from 2003 to 2017 were included. Findings: There was a significant interaction effect between capital structure and institutional ownership on financial performance through corporate diversification. The study extended market power theory by examining institutional ownership structure given that corporate diversification is not only a source of power to drive a firm’s performance. Practical Implications: Institutional investors provide equity capital that is collaborated with the firm’s capital structure. As a result, there exist sufficient resources to take on diversification strategy despite this translating to a smaller amount in terms of financial performance. The study had implications on Market timing theory which opines that market timing is a ‘first order determinant’ to aid in selecting a suitable form of financing given debt and equity. Ideally, the preferences of different owners in the firm would affect the choice between debt and equity financing. Originality/value: Investigation of the interaction effect between capital structure and institutional ownership on financial performance through corporate diversification.

Board Gender Heterogeneity, Corporate Diversification and Cash Flow Performance of Deposit Money Banks in Nigeria: An Independent and Joint Effect Analysis

The objective of this study was to examine the effect of board gender heterogeneity and corporate diversification on cash flow performance of Deposit Money Banks (DMBs) in Nigeria. The study specifically examined the effect of gender heterogeneity and business subsidiary on operating, investing and financing cash flow performances. The study adopted the ex-post facto research design; as the goal is not to manipulate any variable but rather to establish effect. The population comprised quoted DMBs and the sample restricted to a purposive sample of six (6) banks whose annual reports were accessible for the period of 2005-2020 which is the time scope of this study. The data were analysed using the multiple regression technique. The results showed that gender heterogeneity and corporate diversification does not have a statistically significant effect on cash flow performance jointly and individually. Based on these findings, the study recommended that Gender heterogeneity should be allowed on the boards of DMBs not necessarily to promote cash flow performance, but for equity, fairness and relative peace as supported by previous literature.