**1. Introduction**

Managers tend to diversify their business to ge<sup>t</sup> more benefits from the current market with minimum risk. Globalization provides an opportunity to expand their business across the border for profit maximization. Thus, corporate diversification strategy becomes important for the expansion and growth of firms in competitive and dynamic environments. The objective of corporate diversification is to increase profitability, market share, debt capacity, growth opportunity, risk reduction, and the need to use human and financial resources efficiently (Afza et al. 2008). Changes in economic or industrial conditions force managemen<sup>t</sup> to diversify their business (Phung and Mishra 2016). Diversification also helps firms to explore different markets (Gomes and Livdan 2004).

When firms go for diversification, they need extra capital. According to Lewellen (1971), diversified firms need more debt financing than non-diversified firms. The effective financial structure maximizes the value for shareholders. There are three types of financial structure in finance theory: investing, financing, and dividend policies (Zulkafli et al. 2015). Corporate governance plays an important role to improve the firms' financial performance (Yermack 1996; Erickson et al. 2005). We take corporate governance into consideration and how corporate governance affects the firms' financial performance. Claessens and Yurtoglu (2013) explain that a good governance system is beneficial for the firms through better access to finance, good financial performance, and more desirable treatment of stakeholders.

In this complex world, survival of the manufacturing industry becomes more challenging. Given the complex, globalized, and challenging environment, there is a need for survival and better financial performance of the manufacturing sector. Therefore, this sector has to diversify its businesses into different products and different markets. However, the corporate diversification, financial structure (investment, financing, and dividend policies), and corporate governance are the

important factors to enhance the firms' financial performance. We find that product diversification, geographic diversification, and financial structure significantly affect the firms' financial performance. The outputs of our study sugges<sup>t</sup> that financial policies are important determinants of firms' financial performance. In addition, our findings are beneficial for firms in emerging markets engaging in diversification operations.

There are five sections of the study. We discuss the introduction in Section 1 followed by literature in Section 2. The methodology is explained in Section 3. Section 4 deals with the empirical analysis and we conclude our study in Section 5.
