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Governance and Performance Implications of Diversification Strategies: Evidence from Large U.S. Firms
Author(s) -
Singh Manohar,
Mathur Ike,
Gleason Kimberly C.
Publication year - 2004
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.0732-8516.2004.00086.x
Subject(s) - diversification (marketing strategy) , corporate governance , business , agency (philosophy) , principal–agent problem , accounting , agency cost , monetary economics , industrial organization , finance , economics , shareholder , marketing , philosophy , epistemology
Recent research focuses on explaining the diversification discount. However, there is little direct evidence regarding the relation among ownership structure, corporate governance, and corporate diversification. The results in this paper suggest that agency issues do not account for firms adopting a particular diversification strategy. Also, the performance consequences of the shift in the diversification strategy and the subsequent changes in institutional and block ownership structures are not related to agency issues. In fact, investors seem not to avoid diversified firms per se . We suggest that observed board and ownership differences between diversified and focused firms are due to their being at different stages of corporate evolution.