Managerial ownership,diversification, and firm performance: Evidence from an emerging market |
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| Authors: | Chiung-Jung Chen Chwo-Ming Joseph Yu |
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| Institution: | 1. Department of Business Administration, Chung Yuan Christian University 200, Chung Pei Rd., Chung Li, Tao Yuang 32023, Taiwan, ROC;2. Department of Business Administration, National Chengchi University 64, Sec. 2, Chihnan Road, Taipei 11605, Taiwan, ROC;1. Department of Business Administration, Universidad Carlos III de Madrid, Calle Madrid, 126, E-28903 Getafe, Madrid, Spain;2. Facultad de Economía y Empresa, Universidad de Salamanca, Campus Miguel de Unamuno, s/n, E-37007 Salamanca, Spain;1. Trakya University, 22030, Turkey;2. Marmara University, Istanbul, 34180, Turkey;1. School of Humanities, Economics and Law, Northwestern Polytechnical University, Xi’an 710129, China;2. School of Management, China University of Mining and Technology, Xuzhou 221116, China;3. University of Exeter Business School, Rennes Drive, Exeter EX4 4PU, UK;4. Tyndall Center for Climate Change Research and School of International Development, University of East Anglia, Norwich NR4 7TJ, UK;1. School of Sport, Tourism and Hospitality Management, Temple University, Philadelphia, PA, USA;2. School of Hotel, Restaurant, and Tourism Management, University of South Carolina, Columbia, SC, USA |
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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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