Product Diversification and the Financial Performance of Manufacturing Companies in Kenya

This study sought to establish the impact product diversification strategies as used by manufacturing entities in Kenya on the financial performance of these entities focusing on the earnings before interest and tax (EBIT) and return on assets (ROA). Limited research has been carried out on how manufacturing entities in Kenya manage operational risks despite these entities facing high volatility in the operating environment. The objectives of the study therefore focus on how product diversification as a risk management strategy influences the financial performance of manufacturing entities in Kenya. The research was based on the modern portfolio theory as by carefully choosing of investments to be included in a portfolio; an investor can effectively minimize the risk exposure and in the process maximize the portfolio expected return. The study used ten year panel data for the period spanning 2007 – 2016 from a sample of forty nine companies. From the findings, the null hypotheses of the study were not rejected implying that product diversification does not have a significant influence on the financial performance of manufacturing entities in Kenya when measured against both EBITS and ROA