Corporate Diversification, Managerial Ownership, and Firm Value: Evidence from the Thai Financial Crisis

Abstract

This study investigates whether corporate diversification in Thailand led to value creation or destruction. The evidence shows that, like studies in developed countries, companies listed on the Stock Exchange of Thailand (SET), on average, experience a value loss of more than 10% through their corporate diversification. The results suggest that the value loss due to diversification stems from the presence of agency costs. The Asian Financial Crisis did not alter the propensity of Thai firms to diversify and that the level of managerial ownership in a firm is not affected by the Crisis.