Ownership Structure and Firm Diversification of the Group

• Main Authors: Wei-cheng Lai, 賴維誠
• Other Authors: Jian-Fa Li
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/42124081364159455028

碩士 === 朝陽科技大學 === 財務金融系碩士班 === 101 === In the present study, we investigate the motive of companies’ diversification in terns of the agency cost and further study the impact on the firm performance. The empirical results show that the controlling rights of controlling shareholders are positively correlated to the cash-flow rights. This confirms that Taiwan Group''s core companies are belong to ownership concentration ones, which is similar to that in companies of most Southeast Asian countries (La Porta et al.1999) As in the company with the concentration of ownership, the controlling shareholder owns both control rights and cash-flow rights in which those have the impact on the value of the company, in which those are the incentive effects and the entrenchment effects. Empirically we show that the more serious agency problems the group’s core company has, the worse the entrenchment effects are. It would decrease the the value of the company since the controlling shareholder might take the product diversification strategy basing on the self-interested behavior. Even though we could not prove that the less serious agency problems the company has, the controlling shareholder owns the incentive effect. However, we find the greater cash flow rights the company has, the company could enhance its firm performance through diversification.