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

Détails

ID Serval
serval:BIB_B32184EE6808
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Titre
Does good governance prevent bad strategy? A study of corporate governance, financial diversification, and value creation by French corporations, 2000–2006
Périodique
Strategic Management Journal
Auteur(s)
Castañer X., Kavadis N.
ISSN
0143-2095
ISSN-L
1097-0266
Statut éditorial
Publié
Date de publication
07/2013
Peer-reviewed
Oui
Volume
34
Numéro
7
Pages
863-876
Langue
anglais
Résumé
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 © 2012 John Wiley & Sons, Ltd.
Mots-clé
corporate governance, corporate strategy, incentives, monitoring, value creation
Web of science
Création de la notice
12/03/2012 13:44
Dernière modification de la notice
20/08/2019 15:21
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