Research into the Overall Effect of the Diversification Strategies in the Financial Services Industry

Abstract

The purpose of this chapter is to analyse the performance effects of the diversification strategies within the financial sector. Diversification and more particularly the relation between diversification and performance, has been well-documented in strategic management, finance and to a lesser extent in industrial economics literature (Hoskisson and Hitt, 1990; Ramanujam and Varadarajan, 1989). Despite the great volume of research in this area performance effects of firm diversification remain undecided. This is due to different performance measures, diversification measures, samples and time periods (Lloyd and Jahera Jr., 1994). Johnson and Thomas (1987) are not surprised with the different findings: the findings are likely to differ because the contexts differ. Their solution to this problem is to analyse diversification within a specific industry. This is also the approach we have adopted.