A study on taking risk in Indian firms during the growth period: From the perspective of corporate performance and diversification

Abstract

This study aims to ascertain the relationship between taking risks and diversification, as well as the relationship between taking risks and the firm performance of Indian enterprises throughout the growth period. The standard deviation of EBT/TA has been used as the taking risk index. The time lag between taking risk and firm performance was taken into account. The Herfindahl index was used as an indicator of business diversification, and the ratio of overseas sales was used as an indicator of regional diversification. The quantitative research results suggest that the relationship between taking risks and firm performance is positive for all Indian firms in the growth period, even when a time lag of one to four years is taken into account. Furthermore, the results suggest that a moderate level of business diversification is desirable and that further progress is desirable for regional diversification.

Keywords: risk-taking, business diversification, regional diversification, growth period