Abstract

Diversification plays a key role for firms and is one of the main sources of growth opportunities, as well as a hot topic in the management literature. This paper studies the impact of diversification on the accounting and market performance of medium and large Italian companies. The results show a negative effect, especially in the hypothesis of unrelated diversification. This effect is positively moderated by the presence of financial constraints, while negatively by the firms’ age and size. Our research provides important firm-level implications, suggesting managers to pay particular attention to internal and external factors that can make diversification a value-enhancing strategy.