Diversification and the Performance of Australian Enterprises

Melbourne Institute Working Paper No. 28/97

Date: November 1997


Derek Bosworth
Peter Dawkins
Mark Harris
Stuart Kells


The aim of this paper is to examine empirically the relationship between diversification and firm performance. The paper uses a sample panel of Australian firms covering the period 1989 to 1994. Following a discussion of some arguments for and against diversification, bivariate and multivariate analyses are performed to test whether diversification ceteris paribus improves or impedes performance. The results indicate that diversification has a negative impact on firm performance, controlling for firm size, gearing, and whether or not firms are listed and foreign owned.

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