The influence of unrelated diversification and ownership structure on firm value: Evidence from Philippine conglomerates

Date of Publication

2014

Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Management of Financial Institutions

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management

Thesis Adviser

Robert Dan Roces

Defense Panel Chair

Ma. Esperanza Joven

Defense Panel Member

Eleanor Salumbre
Rosvie Gonzales

Abstract/Summary

Recent trends show that top Philippine conglomerates, with more than 91% of the Philippine Stock Exchange index (PSEi) market cap, have continued to diversify into the non-core industries (Santiago & Magpayo, 2007 Gitierrez & Rodriguez, 2013). We examine the effect of diversification on firm excess value, with considerations of ownership structure, particularly the supermajority status and family ownership while controlling for firm characteristics and industry sectors. Using the excess value methodology developed by Beger and Ofek (1995), we utilize a non-balanced panel of 167 publicly-traded from 2004 to 2013. Results suggest that there is a 43% to 56% discount from operating in another industry. However, the discount from diversifying can be offset by ownership structure characteristics, wherein having a supermajority status enjoys a 33% premium. We find that conglomerates can extract benefits from diversification strategies through the composition of their ownership structure.

Abstract Format

html

Language

English

Format

Print

Accession Number

TU21767

Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

90 leaves : illustrations ; 28 cm.

Keywords

Conglomerate corporations--Philippines; Financial institutions--Management

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