Moderating effect of corporate parenting roles on the relationship between product diversification strategies and corporate performance of listed companies on Bursa Malaysia

• Main Author: Mehmood, Khawaja Khalid
• Format: Thesis
• Language: English; English
• Published: 2015
• Subjects: HD58.9 Organizational Effectiveness.
• Online Access: http://etd.uum.edu.my/5407/

Past research examining effect of product diversification strategy on corporate performance has produced inconclusive results. Equal ambiguity resides in the relative superiority and effects of related diversification strategy versus unrelated diversification strategy on corporate performance. Amidst, corporate parenting has been considered as a crucial issue related to diversification strategies. Primarily, this study attempted to reconcile paradox concerning diversification strategies – performance relationship by focusing on the moderating effect of corporate parenting roles on the relationship. Additionally, the study used multiple performance measures to enrich the investigation. Keeping in view the important role of Malaysian corporate sector in country’s growth and development, and proliferation of diversified companies in Malaysia, this study was conducted on Public Listed Companies (PLCs) listed on Bursa Malaysia’s Main Market. Secondary data was obtained mainly from companies’ annual reports, while primary data was collected through questionnaires sent to top managers of PLCs. This study utilised sample of 123 PLCs, and employed various statistical methods to draw conclusions using SPSS. The study reveals that product diversification strategy in total, does not affect corporate performance. Related diversification strategy positively affects Tobin’s q and price to book value, and unrelated diversification strategy negatively affects return on assets and price to book value. Synergy manager positively moderates relationship between related diversification strategy and Tobin’s q, and price to book value. Parental developer positively moderates relationship between related diversification strategy and all financial measures of corporate performance. Portfolio manager positively moderates relationship between unrelated diversification strategy and return on assets, and return on equity. Related diversifiers seem to outperform unrelated diversifiers on Tobin’s q and price to book value. Parental developers perform well against synergy managers on return on assets and return on equity. The findings contribute to relevant theories and recommend managers to adopt suitable corporate parenting roles while pursuing diversification strategies.