{"title":"The Value of Diversification, Managerial Ability and Corporate Governance: Evidence from Malaysian Firms","authors":"Chyn-Hwa Lee, S. Foong","doi":"10.22452/ajba.vol16no1.2","DOIUrl":null,"url":null,"abstract":"Manuscript type: Research paper Research aims: This paper examines the moderating effect of managerial ability on the relationship between diversification and firm value. Design/Methodology/Approach: The analysis is based on all KLSE-listed firms across nine sectors over the period of 2009 to 2017 using panel regression. Research findings: High-ability managers increase Tobin’s q. Managerial ability changes the diversification-firm value relationship from negative to significantly positive. Managerial ability, in terms of governance mechanism, CEO age, and education background, has a positive moderating effect on the value outcome of diversification. Theoretical contribution/Originality: This study is one of the first to link resource-based perspective and outcome of diversification, and find a moderating relationship between diversification and firm value. It contributes to resource-based theory, highlighting that accumulated human capital is a valuable strategic resource for a firm. The results also contribute to the corporate governance literature and provide support for upper echelons theory. Practitioner/Policy implication: The findings are valuable to diversified firms in understanding the effect of managerial ability on the outcome of diversification. Diversified firms that hire older CEOs with better education, practise separate leadership structures, and have a mostly independent board are more likely to benefit from diversification. Research limitation/Implications: This study uses only one proxy for managerial ability. Second, firms are grouped by industry to compare efficiency. However, firms in the same industry can have quite varied inputs and outputs depending on their asset and operation mix.","PeriodicalId":54083,"journal":{"name":"Asian Journal of Business and Accounting","volume":" ","pages":""},"PeriodicalIF":0.8000,"publicationDate":"2023-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Asian Journal of Business and Accounting","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.22452/ajba.vol16no1.2","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Manuscript type: Research paper Research aims: This paper examines the moderating effect of managerial ability on the relationship between diversification and firm value. Design/Methodology/Approach: The analysis is based on all KLSE-listed firms across nine sectors over the period of 2009 to 2017 using panel regression. Research findings: High-ability managers increase Tobin’s q. Managerial ability changes the diversification-firm value relationship from negative to significantly positive. Managerial ability, in terms of governance mechanism, CEO age, and education background, has a positive moderating effect on the value outcome of diversification. Theoretical contribution/Originality: This study is one of the first to link resource-based perspective and outcome of diversification, and find a moderating relationship between diversification and firm value. It contributes to resource-based theory, highlighting that accumulated human capital is a valuable strategic resource for a firm. The results also contribute to the corporate governance literature and provide support for upper echelons theory. Practitioner/Policy implication: The findings are valuable to diversified firms in understanding the effect of managerial ability on the outcome of diversification. Diversified firms that hire older CEOs with better education, practise separate leadership structures, and have a mostly independent board are more likely to benefit from diversification. Research limitation/Implications: This study uses only one proxy for managerial ability. Second, firms are grouped by industry to compare efficiency. However, firms in the same industry can have quite varied inputs and outputs depending on their asset and operation mix.
期刊介绍：
An academic journal that aims to advance knowledge in the business and accounting disciplines, to narrow the gap between theory and practice, and to set direction for policy initiatives in Asia. Welcome to the Asian Journal of Business and Accounting (AJBA). AJBA is an international refereed journal, published biannually (30th June and 30th December) by the Faculty of Business and Accountancy, University of Malaya, Malaysia. AJBA aims to publish scholarly business researches that are relevant to Malaysia and the Asian region. It intends to highlight the practical implications in promoting better business decision making process and the formulation of public policy in Asia. This journal publishes theoretical, conceptual, and empirical papers within the broad areas of business and accounting in Asia. The AJBA covers a broad spectrum of the business and accounting disciplines. A suggestive (though not necessarily comprehensive) list of areas that would be included in this journal are: general management, strategic management, human resource management, organizational behaviour, labour and industrial relations, international business management, business communication, entrepreneurship, leadership, management science, operations management, production management, supply chain management, marketing management, brand management, consumer behaviour, information management, e-marketing, e-commerce, quality management, retailing, service marketing, hospitality management, hotel and tourism management, asset pricing, capital and money markets, corporate finance, derivatives markets, finance and banking, financial economics, etc.
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