Exploring the linkage between Diversification Strategies and Financial Strategies of selected Indian Firms

The empirical investigation of relation between the diversification and financial strategies of firms has been an area of interest for studies in recent past. The present study attempts to address the significant issues related to diversification on Indian Firms. It precisely tries to explore whether there is any relationship between “Extent of Diversification” and “Financial Strategy” of Selected Indian Firms? Is there any relationship between “Diversification Strategy” and “Financial Strategy” of Selected Indian Firms? An empirical analysis of the extent of diversification and diversification strategy of top 30 companies (Market Capitalisation) listed in the Bombay Stock Exchange is done for a single period (2015–16) by using ANOVA. Bankruptcy risk, systematic risk, unsystematic risk, leverage and firm size are the variables used to measure Financial Strategy of Firm and NIC codes are used to measure extent of diversification while diversification strategy is defined in terms of mode of entry adopted by the firm for new business. The results of the study show that diversified firms are at higher level of risk-particularly unsystematic and Bankruptcy risk. Moreover, no significant relationship was observed in mode of entry and Financial Strategy of the firm. This study is expected to help mangers in taking diversification decisions.