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Agency Problems, Equity Ownership, and Corporate Diversification
Abstract
We provide evidence on the agency cost explanation for corporate diversification. We find that the level of diversification is negatively related to managerial equity ownership and to the equity ownership of outside blockholders. In addition, we 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.
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Cited by
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Global Diversification, Industrial Diversification, and Firm Value
Denis, D. J., Denis, D. K., & Yost, K. (2002) · The Journal of Finance · doi:10.1111/0022-1082.00485 · Cited by 1,049
Self-citationCEO compensation and incentives: Evidence from M&A bonuses
Grinstein, Y., & Hribar, P. (2004) · Journal of Financial Economics · doi:10.1016/j.jfineco.2003.06.002 · Cited by 650
Corporate payout policy and managerial stock incentives
Fenn, G. W., & Liang, N. (2001) · Journal of Financial Economics · doi:10.1016/s0304-405x(01)00039-3 · Cited by 559
Metadata
- Authors
- DENIS, D. J., DENIS, D. K., & SARIN, A.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 1997-03
- Volume
- 52
- Issue
- 1
- Pages
- 135-160
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2121925065
- Cited by
- 1,304
- References
- 0
- FWCI
- 146.27
- Type
- journal article
- Language
- en
- Open access
- closed
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- DENIS, D. J., DENIS, D. K., & SARIN, A. (1997). Agency Problems, Equity Ownership, and Corporate Diversification. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.1997.tb03811.x
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
