Ng , Sin Huei
(2014)
How Does Group Affiliation Affect The
Diversification Performance Of Familycontrolled Firms In Malaysia?
– A Governance Perspective.
Asian Academy of Management Journal of Accounting and Finance, 10 (2).
pp. 1-35.
ISSN 1823-4992
Abstract
This paper examines the roles of business group affiliations and whether the size and
ownership structure of business groups influence the performance outcomes of
diversification among family-controlled firms in Malaysia. It presents evidence that
agency-driven and thus performance-diminishing firm diversification is more likely to
take place in firms affiliated with a family-controlled business group than in independent
firms. The findings support the hypothesis that if the benefits of diversification can be
captured through group-level diversification, then diversification at the firm level is more
of an act of expropriation. In Malaysia, the undue political interference in business that
to a certain extent has contributed to a weak enforcement of rules causes the enhanced
control of family ownership through the formation of large and structurally complicated
business groups to go unchecked. This grants the controlling families opportunities to
pursue sub-optimal firm diversification policies that bring them more self-interested
benefits at the expense of firm performance.
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