Why do managers diversify their firms? Agency reconsidered

• 成果类型: Article
• 署名作者: Aggarwal, RK; Samwick, AA
• 署名单位: Dartmouth College; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/1540-6261.00519
• 发表日期: 2003
• 页码: 71-118
• 关键词: incentive contracts; EQUITY OWNERSHIP; Risk reduction; corporate; COSTS; side

摘要

We develop a contracting model between shareholders and managers in which managers diversify their firms for two reasons: to reduce idiosyncratic risk and to capture private benefits. We test the comparative static predictions of our model. In contrast to previous work, we find that diversification is positively related to managerial incentives. Further, the link between firm performance and managerial incentives is weaker for firms that experience changes in diversification than it is for firms that do not. Our findings suggest that managers diversify their firms in response to changes in private benefits rather than to reduce their exposure to risk.