Corporate Governance and the Diversification Discount

2009 ◽  
Author(s):  
Daniel Hoechle ◽  
Markus M. Schmid ◽  
Ingo Walter ◽  
David Yermack
Keyword(s):  
Corporate Governance ◽  
Diversification Discount

scholarly journals How much of the diversification discount can be explained by poor corporate governance?

2012 ◽  
Vol 103 (1) ◽  
pp. 41-60 ◽  
Author(s):  
Daniel Hoechle ◽  
Markus Schmid ◽  
Ingo Walter ◽  
David Yermack
Keyword(s):  
Corporate Governance ◽  
Diversification Discount

Does corporate governance mitigate bank diversification discount?

2016 ◽  
Vol 45 ◽  
pp. 129-143 ◽  
Author(s):  
Hsin-Yu Liang ◽  
I-Ju Chen ◽  
Sheng-Syan Chen
Keyword(s):  
Corporate Governance ◽  
Diversification Discount

scholarly journals The association between corporate governance and product diversification in Brazilian firms: an empirical study

2008 ◽  
Vol 5 (2) ◽  
pp. 367-378
Author(s):  
Wesley Mendes-da-Silva ◽  
Ervin L. Black ◽  
Joshua S. Mallett
Keyword(s):  
Corporate Governance ◽  
Empirical Study ◽  
Current Knowledge ◽  
Positive Association ◽  
Product Diversification ◽  
Diversification Discount ◽  
Tobin's Q ◽  
Good Corporate Governance ◽  
Diversified Firms ◽  
A Company

In this paper we examine the association between product diversification and corporate governance. We add to the pool of current knowledge in three ways. First, we include the effects of strategy on diversification in our model. Second, we eliminate observations that have both good corporate governance and unchanging, high diversification that Anderson et al (2000) attribute to a confounding theory. Third, we use Brazilian data. Using Brazilian companies allows us to see the corporate governance norms, diversification norms, and the existence of a diversification discount in a developing market. We find that there is a positive association between the strength of corporate governance and a company’s level of diversification. We also find that the level of corporate governance significantly affects whether a company is highly diversified. Finally, we find that there is a diversification discount for Brazilian companies. However, after controlling for the effect of corporate governance on diversification, we find that highly diversified firms do not have a significantly different Tobin’s Q.

Corporate Governance and the Diversification Discount: The Implications of the Sarbanes-Oxley Act

2011 ◽  
Author(s):  
Anwar S. Boumosleh ◽  
Brandon N. Cline ◽  
Fawzi Jaber Hyder ◽  
Adam S. Yore
Keyword(s):  
Corporate Governance ◽  
Diversification Discount ◽  
Sarbanes Oxley

Can informal corporate governance mechanisms mitigate diversification discount? Evidence from Malaysia

2018 ◽  
Vol 14 (5) ◽  
pp. 522-541
Author(s):  
Kian Tek Lee ◽  
Chee-Wooi Hooy
Keyword(s):  
Corporate Governance ◽  
Emerging Market ◽  
Ownership Concentration ◽  
Political Connection ◽  
Group Affiliation ◽  
Diversification Discount ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
Business Group Affiliation ◽  
Diversified Firms

Purpose The purpose of this paper is to examine whether any specific informal corporate governance mechanisms under consideration in this study, namely, political connection, business group affiliation and ownership concentration, are able to mitigate the diversification discount for emerging-market diversified firms using Malaysia as an examination lab. Design/methodology/approach The study uses a sample data of the entire non-financial public-listed firms in Malaysia over a 12-year period from 2001 to 2012. The generalized method of moments estimators are employed to account for the endogeneity of both corporate governance and diversification. Findings This study finds that business group affiliation particularly with large size can help to mitigate the diversification discount whereby political connection and ownership concentration magnify the discount. The finding is robust to alternative diversification measurements, to alternative methods and to endogeneity bias. Research limitations/implications This result implies that diversified firms with affiliation to large business groups are able to reduce the magnitude of the discounted value of diversification. Practical implications This study helps managers, shareholders and investors to evaluate their current/future investments related to firms with diversified business segments. This study also provides implications for policymakers and regulatory bodies to assess the adequacy and competency of the current corporate governance frameworks in place. Originality/value This study incorporates the country-specific institutional dimension in designing a research framework that is more relevant in examining the influential effect of governance-related characteristics on the diversification-firm value relationship in an emerging market.

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