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Managerial ownership, diversification, and firm performance: Evidence from an emerging market

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  • Chen, Chiung-Jung
  • Yu, Chwo-Ming Joseph
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    Abstract

    Numerous existing studies have explored the impact of corporate diversification on firm performance, whereas considerably less research has investigated the inter-relationships among managerial ownership, diversification, and firm performance. This paper develops several hypotheses based on the agency theory self-interest perspective and tests the relationships among managerial ownership, corporate diversification, and firm performance using a sample of 98 emerging market firms listed on the Taiwan Stock Exchange. The results show a U-shaped relationship between managerial ownership and corporate diversification, similar to that found in prior studies. However, the inflection point is 33.17%, which is lower than that found in previous studies. Moreover, in contrast to prior results, corporate diversification is found to be positively associated with short-term firm performance and bears no relationship with mid-term firm performance, while firms engaged in unrelated diversification outperform those engaged in related diversification. This paper concludes with theoretical implications and suggestions for future research.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 21 (2012)
    Issue (Month): 3 ()
    Pages: 518-534

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    Handle: RePEc:eee:iburev:v:21:y:2012:i:3:p:518-534

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    Related research

    Keywords: Agency theory; Corporation diversification; Emerging market; Firm performance; Managerial ownership;

    References

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    Cited by:
    1. Suh, Yongyoon & Kim, Moon-Soo, 2014. "Internationally leading SMEs vs. internationalized SMEs: Evidence of success factors from South Korea," International Business Review, Elsevier, vol. 23(1), pages 115-129.

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