Corporate diversification, performance, and restructuring in the largest Japanese manufacturers

Yoshitaka Fukui, Tatsuo Ushijima

Research output: Contribution to journalArticlepeer-review

38 Citations (Scopus)


This article examines the industry diversification of the 142 largest Japanese manufacturers in 1973-1998. We find that sample firms steadily increased diversification. Despite the increase, the relatedness of their business measured in three ways based on the Japanese IO table stayed essentially constant. Regression results show that the average relationship between diversification and firm performance is negative. Firms can mitigate the negative impact of diversification on profitability by confining diversification to industries that are closely related to their main business. However, this effect of relatedness is insignificant for firm value (Tobin's Q), suggesting that the profitability increase due to greater relatedness does not last long. Consistently, a wide range of diversified firms restructured themselves in the late 1990s by divesting business units. J. Japanese Int. Economies 21 (3) (2007) 303-323.

Original languageEnglish
Pages (from-to)303-323
Number of pages21
JournalJournal of The Japanese and International Economies
Issue number3
Publication statusPublished - 2007 Sept
Externally publishedYes


  • Corporate diversification
  • Japanese firm
  • Relatedness
  • Restructuring

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations


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