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

Listed author(s):
  • Chen, Chiung-Jung
  • Yu, Chwo-Ming Joseph
Registered author(s):

    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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    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
    DOI: 10.1016/j.ibusrev.2011.06.002
    Contact details of provider: Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/133/description#description

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