| dc.description.abstract | This study was conducted with the objective of finding out
whether highly diversified firms performed better than the less
diversified firms.
The literature review defines the concept of diversification
as used by various authors. The specific areas considered include
the scope of diversification, dimensions of diversification and
the rationale for diversification. The Kenyan insurance industry
is also discussed including the kind of insurance business transacted
in the Kenyan insurance market. In essence, the literature
review develops a conceptualization of diversification in the insurance industry.
A questionnaire was used to collect primary data from the
lnsurance firms. This data was used to classify the firms into
the three diversity groups employed in the study. Secondary data
was obtained from the Registrar General's Office and the Kenya
Reinsurance Library. In particular, data was collected on the
financial performance of the firms from the annual reports. A total
of 10 firms out of 18 firms were included in the study.
Analysis of variance was the main statistical tool used.
The findings of the study revealed that when the firms were
classified on the basis of product diversification, the firms
with medium diversity performed better than either the low or
high diversity firms. When the firms were categorized on the
basis of geographical diversification the firms that were highly
diversified performed better than the two other groups. In both
cases, the difference in performance was not statistically significant.
In spite of the limitations of this study, the findings may
help to explain the weak but suggestive relationship found between
the extent of diversification and performance, as measured
by Return on Assets (ROA). This implies that performance is
responsive to diversification. | en |
