The Diversification Strategy of Family- Control Firms in Taiwan：A Test of Risk Reduction Hypothesis

• Main Authors: Li-Hua Lai, 賴麗華
• Other Authors: Keng-Shen Chen
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/00092929867993534655

碩士 === 朝陽科技大學 === 財務金融系碩士班 === 96 === Many authors had argued that the undiversified character of family stockholdings may provide strong incentive for family-control firm to reduce their cash flow risk by means of diversification strategy. This motivation of family-control firms to pursue diversification strategy has referred to as The Risk Reduction Hypothesis (RRH). How ever, RRH was rarely supported by existing empirical analysis. In this paper, we examine the effectiveness of RRH by using a data set which consisted of firms in non-financial industries in Taiwan. We found that the family-control firms in Taiwan were more diversified than their industry peers. Given diversified, Family-control firms in Taiwan had mostly embarked on unrelated diversification. Sufficient evidences show that the diversification strategy of family-control firms in Taiwan May driven by risk reduction consideration. Our results indicated that the immaturity of emerging stock market and the blue law of family stock holding in Taiwan may establish barriers for controlling family to reduce risk by portfolio adjustment. This may be the reason for RRH to play an important role when family-control firms in Taiwan were making their diversification decisions.