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Based on Schumpeter's theory of economic growth regarding innovation that causes the economy to develop, this study examines the effect of business diversification on financial performance mediated by business risk. The sample used is manufacturing companies that carry out business diversification strategies during the 2014-2018 period on the IDX, amounting to 33 companies, with purposing sampling technique. The method of analysis in this study is experimental, which uses Size and Laverage as control variables. Data analysis in this study uses Path Analysis to see the direct or indirect effect of business diversification on financial performance mediated by business risk. The results of the analysis prove that business diversification has a positive and significant effect on financial performance, and business diversification has a positive and significant effect on business risk. However, business risk is unable to mediate the effect of business diversification on financial performance.
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