How Diversification Can Help CEOs Financially Essay

Total Length: 1058 words ( 4 double-spaced pages)

Total Sources: 4

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Companies and Diversification

Akpinar, O, and Yigit, I. (2016). The Relationship Between Diversification Strategy and Firm Performance in Developed and Emerging Economy Contexts: Evidence from Turkey, Italy And the Netherlands. Journal of Economic and Social Development, 3(2), 78-86.

This research encompassed a close look at data from 166 firms in the Netherlands, 265 firms in Italy, and 128 firms in Turkey (using data from 2007-2011). The point of the research was to explore the difference between various types of diversification and production performance in those three nations. Akpinar (professor, Kocaseli University in Kocaseli Turkey), and Yigit (business faculty member at Marmara University in Turkey) explain that "Related Diversification" is market expansion into new areas, and "Unrelated Diversification" is expansion into a new market "having no relation with the existing one" (Akpinar, et al., 2016).

The hypothesis used by the authors: there would be a positive relationship between "performance and related entropy index" vis-a-vis diversification in Italy and the Netherlands (both developed countries), but no such relationship in Turkey (an emerging country) (83). That hypothesis proved inaccurate. The authors expected there would be no correlation between the diversification and performance in Turkey; it is an "emerging" country (many privatization policies are in place).

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But the hypothesis was rejected for Italy and Holland, because of the recent "worldwide economic crisis" -- which impacted developed countries (Akpinar, 86). The data used was reliable; this is valid research because it examined diversification vs. production; and a limitation of the study was that it only involved 3 countries; and other variables could be considered (national income, gross national product and "crisis conditions" (Akpinar, 86).

Florentina, R. (2012). Corporate Governance and Corporate Diversification Strategies. Review Of International Comparative Management, 13(4), 621-632.

Raluca Florentina is a professor at the Bucharest University of Economic Studies in Romania, and in this peer-reviewed piece the author evaluates the causality relationship between "corporate governance and corporate diversification strategies in the context of the global economic crisis" (Florentina, 2012). Corporate governance is based on the theory of the "organization and the expenses it implies," and the organization's efforts to clarify relationships "between the several actors to the determination of management" (Florentina, 621). Good governance " . . . reduces risks, increases performance . . . improves managerial style," and offers transparency vis-a-vis "social responsibility" (Florentina, 624). But when there are….....

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