Access the full text.
Sign up today, get DeepDyve free for 14 days.
J. Davies, D. Hillier, Patrick McColgan (2005)
Ownership Structure, Managerial Behavior and Corporate ValueJournal of Corporate Finance, 11
W. Kim, Esmeralda Lyn (1986)
Excess Market Value, the Multinational Corporation, and Tobin's q-RatioJournal of International Business Studies, 17
D. Scharfstein, J. Stein (1997)
The Dark Side of Internal Capital Markets: Divisional Rent-Seeking and Inefficient InvestmentCorporate Finance: Valuation
Lawrence Powell, David Sommer, David Eckles (2004)
The Role of Internal Capital Markets in Financial Intermediaries: Evidence from Insurer GroupsMonetary Economics eJournal
M. Bergen, S. Dutta, O. Walker (1992)
Agency Relationships in Marketing: A Review of the Implications and Applications of Agency and Related TheoriesJournal of Marketing, 56
Nawaf Almaskati, A. Bate, G. Bhabra (2015)
Diversification, Corporate Governance and Firm Value in Small Markets: Evidence from New ZealandInternational Accounting eJournal
J. Campa, Simi Kedia (1999)
Explaining the Diversification DiscountAmerican Finance Association Meetings (AFA)
The American Economic Review, 76
Journal of Economics & Management Strategy, 21
Karl Lins, H. Servaes (1999)
International Evidence on the Value of Corporate DiversificationJournal of Finance, 54
Emerging Markets Review, 7
Gordon Bodnar, Charles Tang, J. Weintrop (1997)
Both Sides of Corporate Diversification: The Value Impacts of Geographic and Industrial DiversificationCorporate Finance: Valuation
Journal of Financial Intermediation, 11
Karl Lins, H. Servaes (2001)
Is Corporate Diversification Beneficial in Emerging Markets?Corporate Law: Corporate Governance Law
L. Gómez‐Mejía, Manuel Núñez-Nickel, Isabel Gutiérrez (2001)
The Role of Family Ties in Agency ContractsAcademy of Management Journal, 44
M. Arellano, O. Bover (1995)
Another look at the instrumental variable estimation of error-components modelsJournal of Econometrics, 68
Financial Management, 31
M. Suto (2003)
Capital Structure and Investment Behaviour of Malaysian Firms in the 1990s: A Study of Corporate Governance Before the CrisisCorporate Law: Corporate Governance Law
R. Porta, Florencio Silanes, Andrei Shleifer (1998)
Corporate Ownership Around the WorldCorporate Finance and Organizations eJournal
The Journal of Finance, 61
M. Wintoki, James Linck, Jeffry Netter (2011)
Endogeneity and the Dynamics of Internal Corporate GovernanceCorporate Governance II
Journal of Financial Economics, 64
The Journal of Finance, 57
Journal of Corporate Finance, 30
Lihui Tian, A. Malaczynska, S. Estrin, J. Ang, W. Megginson, JP Mei, Larry Lang, Mario Nuti, E. Perotti, L. Rose, H. Servaes, Oren Sussman, E. Talmor, P. Volpin, Yaping Xu, Hui Gong, Houqi Zhang (2005)
CENTRE FOR NEW AND EMERGING MARKETS Discussion Paper Series Number 40 RETAINED STATE SHAREHOLDING IN CHINESE PLCS: DOES GOVERNMENT OWNERSHIP REDUCE CORPORATE VALUE? *
David Denis, Diane Denis, Keven Yost (2001)
Global Diversification, Industrial Diversification, and Firm ValueJournal of Financial Abstracts eJournal
Heitor Almeida, Daniel Wolfenzon (2005)
A Theory of Pyramidal Ownership and Family Business GroupsERPN: Other Family Business (Sub-Topic)
S. Claessens, Joseph Fan, Larry Lang (2002)
The Benefits and Costs of Group Affiliation: Evidence from East AsiaEmerging Markets: Economics
Andrei Shleifer, Robert Vishny (1996)
A Survey of Corporate GovernanceOrganizations & Markets eJournal
Journal of Financial Economics, 63
Razali Haron (2016)
Do Indonesian firms practice target capital structure? A dynamic approachJournal of Asia Business Studies, 10
Andrei Shleifer, Robert Vishny (1992)
Liquidation Values and Debt Capacity: A Market Equilibrium ApproachJournal of Finance, 47
Chiung-Jung Chen, C. Yu (2012)
Managerial ownership, diversification, and firm performance: Evidence from an emerging marketInternational Business Review, 21
Michael Barclay, Clifford Smith (1999)
The Capital Structure Puzzle: Another Look at the EvidenceJournal of Applied Corporate Finance, 12
A. Schoar (2002)
Effects of Corporate Diversification on ProductivityJournal of Finance, 57
Journal of Econometrics, 87
René Stulz (1999)
GOLBALIZATION, CORPORATE FINANCE, AND THE COST OF CAPITALJournal of Applied Corporate Finance, 12
O. Williamson (1979)
Transaction-Cost Economics: The Governance of Contractual RelationsThe Journal of Law and Economics, 22
S. Claessens, Simeon Djankov, Larry Lang (1999)
The Separation of Ownership and Control in East Asian CorporationsCorporate Finance and Organizations eJournal
R. Blundell, Stephen Bond (1998)
Initial Conditions and Moment Restrictions in Dynamic Panel Data Models
D. Setiawan, Bandi Bandi, L. Phua, Irwan Trinugroho (2016)
Ownership structure and dividend policy in IndonesiaJournal of Asia Business Studies, 10
Javeria Farooqi, Oneil Harris, T. Ngo (2014)
Corporate diversification, real activities manipulation, and firm valueJournal of Multinational Financial Management, 27
Alexander Koch, Julia Nafziger (2007)
Job Assignments Under Moral Hazard: The Peter Principle RevisitedLabor: Personnel Economics eJournal
Yupana Wiwattanakantang (2001)
Controlling Shareholders and Corporate Value: Evidence from ThailandPacific-basin Finance Journal, 9
Journal of Financial Economics, 58
Michael Jensen (1986)
Agency Cost of Free Cash Flow, Corporate Finance, and TakeoversIndustrial Organization & Regulation eJournal
R. Hoskisson, Lorraine Eden, C. Lau, M. Wright (2000)
Strategy in Emerging EconomiesAcademy of Management Journal, 43
M. Prabowo, J. Simpson (2011)
Independent Directors and Firm Performance in Family Controlled Firms: Evidence from IndonesiaCorporate Governance & Economics eJournal
Wenlian Gao, Julia Chou (2014)
Innovation Efficiency, Global Diversification, and Firm ValueS&P Global Market Intelligence Research Paper Series
S. Claessens, Simeon Djankov, Joseph Fan, Larry Lang (2001)
The Pattern and Valuation Effects of Corporate Diversification: A Comparison of the United States, Japan, and other East Asian Economies
(2007)
The fundamental agency problem and its mitigation: independence, equity, and the market for corporate control
A. Boardman, D. Shapiro, A. Vining (1997)
The role of agency costs in explaining the superior performance of foreign MNE subsidiariesInternational Business Review, 6
Philip Berger, E. Ofek (1995)
Diversification's effect on firm valueJournal of Financial Economics, 37
Ronald Anderson, D. Reeb (2003)
Founding‐Family Ownership, Corporate Diversification, and Firm Leverage*The Journal of Law and Economics, 46
Larry Fauver, J. Houston, A. Naranjo (2004)
Cross-country evidence on the value of corporate industrial and international diversificationJournal of Corporate Finance, 10
René Stulz (1993)
Tobin's q, Corporate Diversification, and Firm PerformanceJournal of Political Economy, 102
J. Lu, P. Beamish (2004)
INTERNATIONAL DIVERSIFICATION AND FIRM PERFORMANCE: THE S-CURVE HYPOTHESISAcademy of Management Journal, 47
S. Claessens, Simeon Djankov, Joseph Fan, Larry Lang (2002)
Disentangling the Incentive and Entrenchment Effects of Large ShareholdingsJournal of Finance, 57
Robert Gertner, D. Scharfstein, J. Stein (1994)
Internal Versus External Capital MarketsMicroeconomics: Production
Todd Mitton (2002)
A Cross-Firm Analysis of the Impact of Corporate Governance on the East Asian Financial CrisisJournal of Financial Abstracts eJournal
R. Morck, Andrei Shleifer, Robert Vishny (1988)
Management Ownership and Market Valuation: An Empirical AnalysisJournal of Financial Economics, 20
Lihui Tian, S. Estrin (2008)
Retained state shareholding in Chinese PLCs : Does government ownership always reduce corporate value ?
J. Stein (1995)
Internal Capital Markets and the Competition for Corporate Resources
M. King, Eric Santor (2008)
Family values: Ownership structure, performance and capital structure of Canadian firmsJournal of Banking and Finance, 32
C. Krishnamurti, Aleksandar Šević, Željo Šević (2005)
Legal Environment, Firm-level Corporate Governance and Expropriation of Minority Shareholders in AsiaEconomic Change and Restructuring, 38
David Denis, Diane Denis, Atulya Sarin (1997)
Agency Problems, Equity Ownership, and Corporate DiversificationJournal of Finance, 52
The Journal of Finance, 57
The Journal of Finance, 55
The Journal of Finance, 54
H. Short, K. Keasey (1999)
Managerial ownership and the performance of firms: Evidence from the UKJournal of Corporate Finance, 5
R. Morck, B. Yeung (2003)
Agency Problems in Large Family Business GroupsEntrepreneurship Theory and Practice, 27
P. Leonardi, S. Barley (2010)
What’s Under Construction Here? Social Action, Materiality, and Power in Constructivist Studies of Technology and Organizing
K. Lee, C. Hooy, Guat-Khim Hooy (2012)
The value impact of international and industrial diversifications on public‐listed firms in MalaysiaEmerging Markets Review, 13
Michael Barclay, C. Holderness (1989)
Private benefits from control of public corporationsJournal of Financial Economics, 25
C. Kock, M. Guillén (2001)
Strategy and Structure in Developing Countries: Business Groups as an Evolutionary Response to Opportunities for Unrelated DiversificationIndustrial and Corporate Change, 10
Owen Lamont, Christopher Polk (2000)
Does Diversification Destroy Value? Evidence from Industry ShocksJournal of Financial Abstracts eJournal
J. Matsusaka, Vikram Nanda (2000)
Internal Capital Markets and Corporate RefocusingCorporate Finance and Organizations eJournal
C. Oh, Timo Sohl, Alan Rugman (2015)
Regional and product diversification and the performance of retail multinationalsJournal of International Management, 21
T. Khanna, K. Palepu (1996)
Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business GroupsCorporate Finance and Organizations eJournal
S. Samiee, Kendall Roth (1992)
The Influence of Global Marketing Standardization on PerformanceJournal of Marketing, 56
PurposeThe purpose of this paper is to investigate whether the presence of controlling shareholder affects the value of diversification based on Indonesian listed firms. It further examines whether the degree of controlling ownership and the types of controlling ownership matter.Design/methodology/approachPanel data were used over the period 2006-2010 with dynamic generalised method-of-moments estimations and it defined diversification as industrial diversification, international diversification or diversification in both. A few different thresholds for the control rights of the largest shareholder are also set.FindingsThe results show that industrial diversification improves firm value but international diversification does not, while diversified in both strategies discounted firm value. The presence of a controlling shareholder is found to have a significant diversification discount, and the effect is nonlinear, where the entrenchment effect occurs around 20 to60 per cent threshold of controlling across all types of diversified firms. Last, foreign firms are found to enjoy more value from industrial diversification, but it takes an adverse turn when these involve both diversification strategies. Government firms do not seem to be different from family firms.Research limitations/implicationsThe study shows the need to differentiate diversification strategies and account for non-linearity and ownership identity in modelling diversification value. Also, the degree of shareholders’ control can be a significant channel to address the agency issue on diversification value.Practical implicationsUnder the backdrop of unique Indonesian corporate ownership, the presence of controlling owners is shown, and their ownership affects the value of diversification. The entrenchment effect however appears only at a certain range of ownership. This is a crucial guide for the shareholders to ensure an appropriate monitoring system is installed to maximize the shareholder’s value, especially in family firms.Originality/valueThe value of this paper is twofold. At first, the first empirical evidence on the diversification debate with Indonesian firms for its unique institutional setting is presented. Second, the standard modelling framework to investigate the types of ownership on diversification value is extended, which has rarely been covered in previous investigations.
Journal of Asia Business Studies – Emerald Publishing
Published: Jul 8, 2019
Read and print from thousands of top scholarly journals.
Already have an account? Log in
Bookmark this article. You can see your Bookmarks on your DeepDyve Library.
To save an article, log in first, or sign up for a DeepDyve account if you don’t already have one.
Copy and paste the desired citation format or use the link below to download a file formatted for EndNote
Access the full text.
Sign up today, get DeepDyve free for 14 days.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.