Abstract:
There is little consensus on the corporate diversification-efficiency relationship in
the diversification literature. According to the corporate diversification, firms
have a tendency to get more market share with diversifying in the local segment
or in the international market. Theoretically, a contradictory exists between the
profitable strategy and the value reducing strategy in the diversification strategy.
In this paper, we measure firm’s efficiency by applying Data Envelopment Analysis
(DEA) in manufacturing firms listed in Bursa Malaysia for five years. Meanwhile,
a feed forward multilayer perceptron neural network is applied to model the
mapping function between the input and output data to the efficiency score. Back
propagation (BP) learning algorithm is applied to update network’s weights
through minimizing the cost function, and the best topology of the network is
conducted. The result of this study shows that there is a negative relationship
between total product diversification and efficiency, and international diversification
has a non-linear effect on the efficiency
Machine summary:
ANN-DEA Approach of Corporate Diversification and Efficiency in Bursa Malaysia Meysam Doaei a,*, Seyed Hashem Davarpanah b, Mahdi Zamani Sabzi c aDepartment of Management, Esfarayen Branch, Islamic Azad University, Esfarayen, Iran bSchool of Information and Communication Technology, Griffith University, Brisbane, Queensland, Australia cSenior Expert at Securities and Exchange Organization, Tehran, Iran ARTICLE INFO Article history: Received 12 June 2016 Accepted 28 December 2016 Keywords: Total Product Diversification, International Diversification, Data Envelopment Analysis, Artificial Neural Networks ABSTRACT There is little consensus on the corporate diversification-efficiency relationship in the diversification literature.
In this paper, we measure firm’s efficiency by applying Data Envelopment Analy- sis (DEA) in manufacturing firms listed in Bursa Malaysia for five years.
The result of this study shows that there is a negative relationship between total product diversification and efficiency, and international diversifica-tion has a non-linear effect on the efficiency.
BCC envelopment model for finding the degree of efficiency in this research as noted in below: (View the image of this page)Where x (i = 1, … , m) and y (r = 1, … , s) (all non-negative) are the inputs and outputs of the DMU .
These findings are supported by a number of studies such as Rumelt [41], Montgomery [36], Berger and Ofek [3], Comment and Jarrell [13], Servaes [42], Denis et al.
Moreover, a U-shaped relationship between international diversification and firm performance has been found in some studies as Gaur and Kumar [24], Thomas [45] and Caper and Kotabe [5].
DIVERSIFICATION AND FINANCIAL PERFORMANCE IN BURSA MALAYSIA Accepted in International Journal of Management and Business Research.