Business, Management and Accounting
5 years ago

Controlling owners in Indonesian firms impact value of diversification strategies.

Journal of Asia Business Studies
Controlling shareholders and the effect of diversification on firm value: evidence from Indonesian listed firms
Rayenda Khresna Brahmana, Doddy Setiawan, Chee‐Wooi Hooy

Paper Summary

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The study looked at how having a controlling shareholder affects the value of diversification in Indonesian listed firms. They found that industrial diversification increases firm value, but international diversification does not. Having a controlling shareholder can lead to a diversification discount, especially when they own between 20-60% of the company. Foreign firms benefit more from industrial diversification, but combining both strategies can be harmful. It's important for shareholders to monitor diversification carefully to maximize value, especially in family-owned firms.