Analyzing the Effect of Firm Ownership on Diversification Strategy

This paper analyzes the relation between firm ownership and diversification strategy. To understand this, diversification strategy of state-owned, private and public listed companies has been studied. To understand the type and scope of diversification Vardarajan, and Ramanujam’s model has been used. Results, using Cramer test, Goodman and Kruskal Tau tests, show that there is a meaningful relation between firm ownership and diversification strategy. State-owned firms show highest diversification and diversify very much. Private firms diversify the least, and do only related diversification. Although public firms diversify somehow more than private firms, these companies diversify mostly relatedly. Firm ownership was also classified to government-owned, private and public categories. Statistical population of this research includes companies listed in Tehran Stock Exchange (TSE)., and descriptive statistics show that there is a meaningful relation between firm ownership type and firm diversification strategy. Government owned companies have highest level of diversification. Diversifications of these companies have been mostly unrelated diversification. These companies have experienced low related diversifications. Private firms have lowest level of diversification. These companies have experienced related diversification mostly and unrelated diversification is not very common among private firms. Public firms have a moderate level diversification. Their diversification is higher than that of private firms; however they have also diversified into related fields and experience low unrelated diversification.