Does good governance prevent bad strategy? A study of corporate governance, financial diversification, and value creation by French corporations, 2000–2006

Castañer, Xavier; Kavadis, Nikolaos

doi:10.1002/smj.2040

Cited by 70 publications

(70 citation statements)

References 90 publications

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“…Related diversification refers to diversification strategy which is associated with expanding business in a similar product or in the same product line (backward or forward integration) (Chen and Yu 2012). On the other hand, according to Castañer and Kavadis (2013) unrelated diversification refers to a diversification strategy that extend the company's operation into a different business which has a different input-output configuration or has limited common resources. Hence, we may argue that a company which adopts related diversification strategy, has related products and services, or participates in the same industry.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

Diversification and corporate social performance in manufacturing companies

Patrisia

Dastgir

2016

Eurasian Bus Rev

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The effects of diversification on financial performance are well-established, less so the way in which diversification influences company behaviour towards stakeholder demand and social concern. This paper investigates the relationship between business diversification and corporate social performance (CSP) in an industrial setting, in Indonesia. CSP is measured with an index constructed from content and disclosure analysis of annual company reports in line with global reporting initiative standards. A sample of 107 listed manufacturing companies from the Indonesian Stock Exchange is used to estimate a lagged multiple regression model to show that industry-level diversification does not have an effect on CSP. However, distinguishing between related and unrelated diversification produces a different outcome whereby, related diversification is negatively and statistically significantly correlated with CSP. Unrelated diversification, on the other hand, shows a positive and statistically significant relationship. It means the relationship between unrelated diversification and CSP is more positive than the relationship between related diversification and CSP. The findings offer a unique insight into industrial diversification and CSP in Indonesia's expanding manufacturing sector.

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Section: Theory and Hypothesesmentioning

confidence: 99%

Diversification and corporate social performance in manufacturing companies

Patrisia

Dastgir

2016

Eurasian Bus Rev

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“…Indeed, research has found that unrelated or excessive diversification is associated with poor internal control (Amihud & Lev, 1981;Hoskisson, Hitt, & Hill, 1991;Ravenscraft & Scherer, 1991). In general, researchers seem to agree that weak governance at the level of ownership (concentration), board of directors (independent judgment), and managerial incentives, is less likely to lead to voluntary (on the part of management) restructuring, but instead to the use of funds for value-destroying strategies (Castañer & Kavadis, 2013;Gibbs, 1993;Hoskisson, Johnson, & Moesel, 1994).…”

Section: Literature Reviewmentioning

confidence: 99%

Who Drives Corporate Restructuring? Co‐Existing Owners in French Firms

Kavadis¹,

Castañer²

2015

Corporate Governance

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Manuscript Type Empirical Research Question/Issue This study aims to explain who drives corporate restructuring, after a period of important corporate governance changes in France, and where the respective role of Anglo‐American institutional investors and domestic family owners have been the object of debate. Research Findings/Insights Using extensive longitudinal data from French publicly‐listed firms during the 2000–2007 period, we find that domestic family ownership is positively related to restructuring. This effect is magnified under conditions of high Anglo‐American institutional investor ownership and poor firm performance. We also find that restructuring improves subsequent firm performance. Theoretical/Academic Implications We contribute to corporate governance research on family firms with a contingent framework about the relative influence of different types of owners with supposedly different value systems and preferences on restructuring. Domestic family owners, even from a country where shareholder value maximization is not historically preeminent, promote restructuring. In contrast, the influence of Anglo‐American institutional investors is indirect: the more they are present in the firm's capital, the more French family owners will further support restructuring, as a means to preserve their socio‐emotional wealth. Anglo‐American institutional investor influence on French family owners is further accentuated under conditions of poor firm performance. Practitioner/Policy Implications Practitioners and, in particular, (potential and current) owners can use our findings to reflect on the implications for corporate decisions of the relative presence of different owners coming from different institutional environments and thus with potentially different objectives. Our results may also be informative to policy makers to further enhance effective regulation.

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“…Agency conflicts likely arise in which CEOchairpersons pursue strategic actions reflective of their own risk aversion despite the shareholders' desires (Eisenhardt, 1989;Gomez-Mejia, 1994). Empirical studies provide evidence in support of this as CEO-chairperson duality is associated with the firm pursuing strategies that are inherently less risky in areas such as foreign direct investment (Ellstrand, Tihanyi, & Johnson, 2002) and corporate diversification (Castañer & Kavadis, 2013). Moreover, firms are more likely to pursue riskier strategies in which the rewards are potentially great yet uncertain, like investing in R&D, when the CEO and chairperson roles are separate (e.g., Kor, 2006;Zahra, Neubaum, & Huse, 2000).…”

Section: Ceo-chairperson Duality and Wfbsmentioning

confidence: 97%

Balancing board? The effects of board independence and capital on firms offering work‐family benefits

Mullins

Holmes

2017

Human Resource Management

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While prior research demonstrates the strategic human resource (HR) advantages associated with offering work–family benefits (WFBs), firms continue to be reluctant in providing their employees with these benefits. Drawing on the corporate governance and stakeholder orientation literatures, this study examines the role of board independence and capital for WFBs being offered in publicly‐traded firms. Our results demonstrate that various director independence and capital attributes are related to the firm offering WFBs. Specifically, board directors who are outsiders, women, and holders of additional directorships, with their broad stakeholder orientation, increase the likelihood of WFBs being offered by the firm [Correction added on December 14, 2017, after first online publication: the preceding sentence has been updated to clarify the findings of the study.]. These findings are of importance to HR practitioners considering the influence that corporate boards can have on the firm's use of HR practices, such as WFBs, that affect all employees, not just the executives.

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Does good governance prevent bad strategy? A study of corporate governance, financial diversification, and value creation by French corporations, 2000–2006

Cited by 70 publications

References 90 publications

Diversification and corporate social performance in manufacturing companies

Diversification and corporate social performance in manufacturing companies

Who Drives Corporate Restructuring? Co‐Existing Owners in French Firms

Balancing board? The effects of board independence and capital on firms offering work‐family benefits

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