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EISSN: 2313-3724, Print ISSN: 2313-626X

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 Volume 7, Issue 6 (June 2020), Pages: 15-21


 Original Research Paper

 Title: Do firms have a target diversification ratio? Evidence from the Tunisian context

 Author(s): Kouki Marouan *


 Faculty of Computing and IT, Northern Border University, Arar, Saudi Arabia

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 * Corresponding Author. 

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This study explores the diversification strategy adjustment mechanisms of firms that experience substantial changes in their activity for 30 Tunisian companies listed on the Tunis Stock Exchange for 15 years over the period 1997-2011. Adjustments appear to be asymmetric among firms with large increases and those with large decreases in diversification ratios. The different adjustments are due to differences in diversification targets. Speeds of adjustment are found to be affected by firm characteristics. In addition, we show that the Tunisian firms adjust their diversification ratios to a target ratio. Indeed, taking into account the fundamental variables that might explain the strategic orientation of a firm, namely the size, age, free cash flow, and profitability, we have shown that the speed of adjustment is on average between 4 and 5 years. The hypothesis of a partial adjustment is thus verified that it is possible to set target levels diversification. 

 © 2020 The Authors. Published by IASE.

 This is an open access article under the CC BY-NC-ND license (

 Keywords: Diversification, Target, Partial adjustment, Entropy

 Article History: Received 22 October 2019, Received in revised form 2 March 2020, Accepted 3 March 2020


No Acknowledgment.

 Compliance with ethical standards

 Conflict of interest: The authors declare that they have no conflict of interest.


 Marouan K (2020). Do firms have a target diversification ratio? Evidence from the Tunisian context. International Journal of Advanced and Applied Sciences, 7(6): 15-21

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