Abstract
Introduction: Diversification, as a corporate strategy, is implemented by managers to enhance the performance of their organizations. It aims to bolster profitability through increased sales volume derived from the introduction of new products and expansion into new markets. Among the four strategies outlined in the Ansoff matrix, diversification represents the riskiest approach, demanding careful investment due to its association with considerable uncertainty and the need to acquire skills and techniques in foreign markets and product domains. Moreover, the outbreak of the COVID-19 pandemic has presented substantial challenges to firms, compelling managers to intensify their efforts in mitigating the adverse impacts of this global crisis on their operational activities.
Objectives: This research aims to explore the relationship between diversification and firm value, taking into account the moderating influence of the COVID-19 pandemic.
Material and Methods: The study focuses on 172 firms listed on the Tehran Stock Exchange, from 2012 to 2021, over ten years. The data analysis employs ordinary least squares regression analysis in conjunction with fixed effects data approach to examine the research hypotheses.
Results: The findings of this study indicate that diversification strategies implemented by Iranian firms have resulted in an enhancement of firm value, as measured by Tobin’s Q ratio. Furthermore, it is revealed that COVID-19 has played a moderating role in the relationship between diversification and firm value.
Conclusion: The empirical evidence suggests that the effects of the COVID-19 pandemic have diminished the positive impact of diversification on firm value.