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Business group diversification, financial constraints and firm performance: the case of Tunisian group affiliated firms

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Abstract

In this paper, we analyze the effect of business group diversification on firms’ performance and we examine whether this effect is particularly relevant for financially constrained firms. We assess these relations using a unique hand-collected database of 67 Tunisian non-financial firms affiliated with business groups during the period of 1998–2016. We provide evidence that there is a quadratic U-shaped relationship between group diversification and firms’ performance (measured by the return on assets and the Tobin’s Q ratios), suggesting that group diversification enhances affiliated firms’ performance only if it exceeds a certain threshold. Our results also show that a high level of business group diversification is particularly beneficial for firms that suffer financial constraints.

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Authors and Affiliations

  1. Ecole Supérieure de Commerce de Tunis, RIM RAF UR 13ES56, Univ. Manouba, Campus Universitaire Manouba, 2010, Manouba, Tunisia

    Dorra Ellouze

  2. RIM RAF UR 13ES56 (ESCT), Institut Supérieur de Gestion de Tunis, 41, Avenue de la Liberté, Cité Bouchoucha, 2000, Le Bardo, Tunisia

    Khadija Mnasri

Authors
  1. Dorra Ellouze
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Correspondence to Dorra Ellouze.

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Appendix: Classification of industries according to the National Institute of Statistics (N.I.S)

Appendix: Classification of industries according to the National Institute of Statistics (N.I.S)

  1. 1

    Agriculture, hunt and forestry

  2. 2

    Fishing and fish farming

  3. 3

    Extractive industries

  4. 4

    Agricultural and food industry

  5. 5

    Textile and clothing industry

  6. 6

    Leather industry

  7. 7

    Manufacturing wood products

  8. 8

    Paper and cardboard industry

  9. 9

    Chemical industry

  10. 10

    Rubber and plastics industry

  11. 11

    Metallurgy

  12. 12

    Manufacture of other non-metallic mineral products

  13. 13

    Manufacturing machinery and equipment

  14. 14

    Manufacturing of electrical and electronic equipment

  15. 15

    Manufacturing of transportation equipment

  16. 16

    Other manufacturing

  17. 17

    Construction, materials and civil engineering

  18. 18

    Trade and car repair

  19. 19

    Wholesale

  20. 20

    Retail business

  21. 21

    Tourism, hotels and restaurants

  22. 22

    Transportation

  23. 23

    Telecommunication

  24. 24

    New technologies

  25. 25

    Real estate

  26. 26

    Education, health and social actions

  27. 27

    Community, social and personal

  28. 28

    Financial activity

  29. 29

    Media

  30. 30

    Other activities

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Ellouze, D., Mnasri, K. Business group diversification, financial constraints and firm performance: the case of Tunisian group affiliated firms. J Manag Gov 24, 273–301 (2020). https://doi.org/10.1007/s10997-019-09454-4

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