The influence of unrelated diversification and ownership structure on firm value: Evidence from Philippine conglomerates
College
Ramon V. Del Rosario College of Business
Department/Unit
Economics
Document Type
Article
Source Title
DLSU Business and Economics Review
Volume
25
Issue
1
First Page
45
Last Page
62
Publication Date
1-1-2015
Abstract
Recent trends show that top Philippine conglomerates, with more than 91% of the Philippine Stock Exchange Index (PSEi) market capitalization, have continued to diversify into non-core industries (Santiago & Magpayo, 2007; Gutierrez & 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 for 167 PSE-traded firms from 2004 to 2013. Results suggest that existence of a discount effect, where there is a 43% to 56% discount when diversifying into another industry. However, this discount can be offset by ownership structure characteristics, wherein having a supermajority status enjoys a 33% premium and being family-owned enjoys a 25% to 54% premium. We find that conglomerates can extract benefits from diversification strategies through the composition of their ownership structure. © 2015 by De La Salle University.
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Recommended Citation
Pratyaksa, R., Sayoc, R. A., Koga, M. M., & Siy, M. O. (2015). The influence of unrelated diversification and ownership structure on firm value: Evidence from Philippine conglomerates. DLSU Business and Economics Review, 25 (1), 45-62. Retrieved from https://animorepository.dlsu.edu.ph/faculty_research/2964
Disciplines
Business Administration, Management, and Operations | Economics
Keywords
Conglomerate corporations--Philippines; Diversification in industry--Philippines; Stock ownership
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