Adamu, Nasiru and Zubairu, Ibrahim Khalil and Ibrahim, Yahya Makarf and Ibrahim, Aliyu Makarf
(2011)
Evaluating The Impact Of Product Diversifcation On Financial Performance Of Selected Nigerian
Construction Firms.
Journal of Construction in Developing Countries , 16 (2).
pp. 91-114.
ISSN 1823-6499
Abstract
The need for the improved performance and continuous survival of construction frms has caused frms to diversify into other businesses. The
purpose of this study is to determine the influence of diversifcation on the performance of some Nigerian construction frms. Financial statements from
seventy construction frms were analysed. The specialisation ratio method was used to measure and categorise the frms into undiversifed, moderately
diversifed and highly diversifed frms, and proftability ratios were used to measure the group-wise performance of the frms. The Student t-test was
used to test the relationship between the extent of diversifcation and performance. The fndings reveal that undiversifed frms outperform the highly
diversifed frms in terms of Return on Total Assets and Proft Margin. Similarly, the moderately diversifed frms were found to outperform the highly
diversifed frms in terms of Return on Equity, Return on Total Assets and Proft Margin. However, no performance difference was found between the
undiversifed frms and the moderately diversifed frms based on the three measures used. A nonlinear relationship was found between the extent of
diversifcation and performance. It was concluded that diversifcation does not necessarily lead to an improvement in proftability. The implication is
that frms are better-off remaining focused if the aim is to improve fnancial performance.
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