Agency problems as antecedents to unrelated mergers and diversification: Amihud and Lev reconsidered

Peter J. Lane, Albert A. Cannella, Michael H. Lubatkin

Research output: Contribution to journalArticle

174 Scopus citations


Amihud and Lev (1981) are widely cited as providing evidence that managers, unless closely monitored by large block shareholders, will attempt to reduce their employment risk through unrelated mergers and diversification. These corporate strategies, however, may not be in shareholders' interests. Reconsidering the agency assumptions underlying Amihud and Lev's study and the methodology they used, we develop hypotheses regarding the association between ownership structure, board vigilance, corporate strategy, and corporate performance from management theory and test them using Amihud and Lev's data from the 1960s and new data from the 1980s. Neither study supports the conclusions of Amihud and Lev, nor the agency theory belief that monitoring efforts by principals affect the strategic behaviors of agents or the performance of firms that they manage.

Original languageEnglish (US)
Pages (from-to)555-578
Number of pages24
JournalStrategic Management Journal
Issue number6
StatePublished - Jun 1 1998



  • Agency theory
  • Diversification
  • Management theory
  • Mergers
  • Monitoring

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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