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The strategy‐shareholder value relationship: Testing temporal stability across market cycles
Author(s) -
Lubatkin Michael,
Chatterjee Sayan
Publication year - 1991
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.4250120402
Subject(s) - diversification (marketing strategy) , shareholder value , shareholder , construct (python library) , value (mathematics) , economics , market value , business cycle , financial economics , econometrics , business , monetary economics , macroeconomics , accounting , finance , marketing , mathematics , statistics , corporate governance , computer science , programming language
Abstract This study examines the stability of the relationship between diversification and shareholder value across contiguous time periods, organized so as to highlight three distinct market cycles. By defining value as a two‐dimensional construct, separating the concurrent economic phenomena of cycle and trend, and controlling for other factors that influence risk and return, this study finds that the best way to protect shareholder value against economic downturns is to diversify in a manner such that ‘all of one's eggs are in similar baskets’.