DOES BUSINESS DIVERSIFICATION AFFECTED COMPANY^S PERFORMANCE IN INDONESIA?
Evy Roslita

Universitas Negeri Jakarta

Abstract

Business diversification is one of an effort made by management to expand the business and improve the company^s financial performance. Business diversification can be done in various ways, one of which is adding business segments. Adding a business segments is an opportunity for managers to improve their performance but is a doubt for investors, considering that the diversity of segments will increase the risk of management. Therefore, this study aims to examine the relationship between the influence of diversification and company^s performances with size and age as variable control and managerial ownership as moderating control. This study took samples from 200 manufacturing industries listed in Bursa Efek Indonesia for the period 2015 - 2019.
The result of multiple linear regression tests using Eviews shows that the measurement of business diversification, measured by HHI (The Herfindahl-Hirschman Index) and the number of business segments have positives effect to company^s financial performance which is measured by ROA and company^s market performance, that is measured by Tobins^Q.
The relationship between diversification and company^s financial performance, ROA, is being stronger with the excistence of moderating variable, managerial ownership. But it decrease the siginificance relationship between diversification and company^s market performance, Tobins^Q.

Keywords: diversification, company^s performace

Topic: Financial