Intersectoral Analysis of Corporate Diversification Performance during Economic Downturns: Evidence from Russian and US Firms

This paper is devoted to a comparative study of the dependencies between the strategies of corporate diversification, namely international and product diversification, and the firm’s performance in the Russian and American markets during financial crises periods and the periods of economic prosperity. The main purpose of this study was to determine the differences in the impact of the crisis on the conglomerates’ performance in two countries. The empirical study was provided based on the sample of public companies with 29,911 firm-years observations (2,459 the U.S. companies and 76 companies from Russia). As a result, we have found that there is an S-shaped relationship between the strategy of international diversification and the performance of companies in the U.S. market, and the financial crisis has a positive moderating impact on this dependence (i.e. highly diversified companies feel more stable on the U.S. market during economic downturns). In Russia, as in a developing country, we established the presence of a quadratic dependence between the level of product diversification and the company’s performance, the crisis in turn does not have a statistically significant impact on this interdependence, which is consistent with previous studies and is explained by the poor institutional environment development.