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

• 成果类型: Article
• 署名作者: Castaner, Xavier; Kavadis, Nikolaos
• 署名单位: University of Lausanne; Erasmus University Rotterdam - Excl Erasmus MC; Erasmus University Rotterdam
• 刊物名称: STRATEGIC MANAGEMENT JOURNAL
• ISSN/ISSBN: 0143-2095
• DOI: 10.1002/smj.2040
• 发表日期: 2013
• 页码: 863-876
• 关键词: CORPORATE GOVERNANCE; corporate strategy; incentives; monitoring; VALUE CREATION

摘要

Building on and extending prior research, we propose a comprehensive framework which posits that free cash flow moderates the impact of corporate governance on financial diversification. We argue that because it increases CEO perceived risk, alignment devices increase rather than decrease financial diversification. In a sample of 59 publicly traded French corporations during 2000-2006, we show that financial diversification negatively impacts shareholder return and firm value. We obtain support for several of our hypotheses: at high levels of free cash flow, CEO variable compensation increases financial diversification, whereas chairman/CEO non-duality reduces it. In contrast, independent directors increase financial diversification at low values of free cash flow (although weakly). We also find that ownership concentration only reduces financial diversification when free cash flow is low.Copyright (c) 2012 John Wiley & Sons, Ltd.