Single business vs multi business firms in India: an empirical analysis

Abstract

We studied the performance of 60 firms, 30 each from two types of firms namely, focused and diversified. Further, of the 30 firms in each group, 10 each were selected on the basis of three different sizes; small (with assets <INR10 billion), medium (with assets ranging between INR10 and <INR50 billion) and large (with assets >INR50 billion). Our intent was to determine which of these displayed superior economic performance. We analysed data for two points of time 2006-07 and 2013-14 using three measures of economic performance. These include profit after tax (PAT), return on capital employed (ROCE) and asset turnover ratio (ATR). We employed parametric (MANOVA, ANOVA) as well as nonparametric (Mann Whitney, Kruskal-Wallis and Chi square) tests. Our analysis started with MANOVA to compare the overall performance of the selected firms for all the three measures. Later, ANOVA was used to further understand specifically, which performance measure was influenced by type and size of the firm. Since, there was a possibility for outliers to influence the findings, nonparametric tests were employed with the assumption that both the finding would give similar results. Our study concluded that there is no significant difference in the performance between focused and diversified firms. However, we found significant difference in the performance of firms based on size, though there were no interaction effects between size and type. Particularly, when diversified and focused firms were separately studied, it was found that for focused firms alone there were significant differences in performance between firms of different sizes.