A Research Journal of Commerce, Economics, and Social Sciences
Online ISSN: 2410-0854
Print ISSN: 1996-2800

Paradigms Journal

The impact of investment diversification on firms’ performance: A comparison of domestic and multinational firms operating in Pakistan
Author(s) :
Said Shah (Department of Management Sciences, University of Swabi, KPK, Pakistan)
Safdar Husain Tahir (Department of Banking & Finance, Government College University, Faisalabad, Pakistan)
Jamil Anwar (Department of Management Sciences, COMSATS Institute of Information Technology, Abbottabad, Pakistan)
Most of the previous studies have concentrated on the working of multinationals operating in advanced countries like USA, UK and Japan ignoring emerging economies like Pakistan.  This study examines the corporate policies of multinational firms operating in Pakistan and comparing with the policies followed by domestic firms.  The study also investigates the variation in financial performance between domestic and multinational firms because of their corporate policies. For testing the hypotheses and other statistics, we employed correlation, ratio and regression analyses techniques using 10 years (2004-2013) secondary data of 153 manufacturing firms including both domestic and multinationals listed on Pakistan Stock Exchange. The results indicate that the performance of multinational firms is better than domestic firms primarily because of investment diversification indicating an effective role of location in determining firms’ performance due to variations in their corporate policies related to working capital and corporate governance. This interface between investment diversification and firms’ profitability are more serious in face of unpredictable oil and commodity prices across the country ultimately drastically influencing the national economy.
Keywords: developing countries, East Asian firms, foreign direct investment, Japan, multinational firms, Pakistan

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