Agency Problems, Equity Ownership, and Corporate Diversification
AbstractThe authors provide evidence on the agency cost explanation for corporate diversification. They find that the level of diversification is negatively related to managerial equity ownership and to the equity ownership of outside blockholders. In addition, the authors report that decreases in diversification are associated with external corporate control threats, financial distress, and management turnover. These findings suggest that agency problems are responsible for firms maintaining value-reducing diversification strategies and that the recent trend toward increased corporate focus is attributable to market disciplinary forces. Copyright 1997 by American Finance Association.
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Bibliographic InfoArticle provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 52 (1997)
Issue (Month): 1 (March)
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