An agency perspective on firm diversification, efficiency and performance: evidence from Malaysia
We examine, from the agency perspective, the relationship between three important corporate measures among the Malaysian publicly-listed family-controlled firms: firm diversification, asset utilization efficiency and firm performance. We also explore the role of board independence in moderating the...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
John Wiley and Sons
2019
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| Online Access: | http://psasir.upm.edu.my/id/eprint/80576/1/FIRM.pdf |
| _version_ | 1796980787772391424 |
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| author | Ng, Sin Huei Boon, Heng Teh Tze, San Ong |
| author_facet | Ng, Sin Huei Boon, Heng Teh Tze, San Ong |
| author_sort | Ng, Sin Huei |
| collection | UPM |
| description | We examine, from the agency perspective, the relationship between three important corporate measures among the Malaysian publicly-listed family-controlled firms: firm diversification, asset utilization efficiency and firm performance. We also explore the role of board independence in moderating the firm diversification-performance relationship. Our findings suggest that the greater the extent of firm diversification, the poorer will the asset utilization efficiency be. The poorer efficiency is likely to have caused the equally poorer performance for the firms in our findings. Notably, firm diversification is found to be more detrimental to performance for those firms affiliated to business group compared to firms without group affiliation. The group-affiliated firms which are found to be more diversified than the non-group firms, could have engaged in greater diversification for the self-interest of the controlling family. Specifically, we find that the agency-driven diversification causes the ROA (Tobin’s Q) of the firms to be lowered by 0.354% (0.026) for every additional increase in the number of business segments as the measure of firm diversification. In terms of the moderating effect of board independence, our finding shows that audit committee of board comprises entirely of independent outside directors positively moderate the firm diversification-performance linkage and is capable of reversing the apparently negative linkage between the two. |
| first_indexed | 2024-03-06T10:28:12Z |
| format | Article |
| id | upm.eprints-80576 |
| institution | Universiti Putra Malaysia |
| language | English |
| last_indexed | 2024-03-06T10:28:12Z |
| publishDate | 2019 |
| publisher | John Wiley and Sons |
| record_format | dspace |
| spelling | upm.eprints-805762020-11-09T15:27:04Z http://psasir.upm.edu.my/id/eprint/80576/ An agency perspective on firm diversification, efficiency and performance: evidence from Malaysia Ng, Sin Huei Boon, Heng Teh Tze, San Ong We examine, from the agency perspective, the relationship between three important corporate measures among the Malaysian publicly-listed family-controlled firms: firm diversification, asset utilization efficiency and firm performance. We also explore the role of board independence in moderating the firm diversification-performance relationship. Our findings suggest that the greater the extent of firm diversification, the poorer will the asset utilization efficiency be. The poorer efficiency is likely to have caused the equally poorer performance for the firms in our findings. Notably, firm diversification is found to be more detrimental to performance for those firms affiliated to business group compared to firms without group affiliation. The group-affiliated firms which are found to be more diversified than the non-group firms, could have engaged in greater diversification for the self-interest of the controlling family. Specifically, we find that the agency-driven diversification causes the ROA (Tobin’s Q) of the firms to be lowered by 0.354% (0.026) for every additional increase in the number of business segments as the measure of firm diversification. In terms of the moderating effect of board independence, our finding shows that audit committee of board comprises entirely of independent outside directors positively moderate the firm diversification-performance linkage and is capable of reversing the apparently negative linkage between the two. John Wiley and Sons 2019 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/80576/1/FIRM.pdf Ng, Sin Huei and Boon, Heng Teh and Tze, San Ong (2019) An agency perspective on firm diversification, efficiency and performance: evidence from Malaysia. International Journal of Finance and Economics, 10 (6). pp. 24-41. ISSN 1099-1158; ESSN: 10769307 http://www.sciedupress.com/journal/index.php/ijfr/article/view/15710/9980 10.5430/ijfr.v10n6p24 |
| spellingShingle | Ng, Sin Huei Boon, Heng Teh Tze, San Ong An agency perspective on firm diversification, efficiency and performance: evidence from Malaysia |
| title | An agency perspective on firm diversification, efficiency and performance: evidence from Malaysia |
| title_full | An agency perspective on firm diversification, efficiency and performance: evidence from Malaysia |
| title_fullStr | An agency perspective on firm diversification, efficiency and performance: evidence from Malaysia |
| title_full_unstemmed | An agency perspective on firm diversification, efficiency and performance: evidence from Malaysia |
| title_short | An agency perspective on firm diversification, efficiency and performance: evidence from Malaysia |
| title_sort | agency perspective on firm diversification efficiency and performance evidence from malaysia |
| url | http://psasir.upm.edu.my/id/eprint/80576/1/FIRM.pdf |
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