In this paper we measure various diversification indices of the 30 largest business groups in Korea during the period of 2001~2012. And using the path analysis model and the GMM model we study the effect of the diversification strategy on each business groups’ performance. The major finding in this paper includes that the related diversification during 2001~2012 has a positive effect on the ROA, and that the unrelated diversification has a negative effect on the ROA variation over the different years at the statistically significant level. Put it another way, the unrelated diversification is found to contribute to the stability of financial performance over the years. Based on the empirical findings here we claim with some caution that the focusing on the core business may be not the best way to improve the competitiveness and the survival condition of the Korean business groups.