TY - JOUR
T1 - Agency problems as antecedents to unrelated mergers and diversification
T2 - Amihud and Lev reconsidered
AU - Lane, Peter J.
AU - Cannella, Albert A.
AU - Lubatkin, Michael H.
PY - 1998/6
Y1 - 1998/6
N2 - 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.
AB - 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.
KW - Agency theory
KW - Diversification
KW - Management theory
KW - Mergers
KW - Monitoring
UR - http://www.scopus.com/inward/record.url?scp=0001059711&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=0001059711&partnerID=8YFLogxK
U2 - 10.1002/(sici)1097-0266(199806)19:6<555::aid-smj955>3.0.co;2-y
DO - 10.1002/(sici)1097-0266(199806)19:6<555::aid-smj955>3.0.co;2-y
M3 - Article
AN - SCOPUS:0001059711
SN - 0143-2095
VL - 19
SP - 555
EP - 578
JO - Strategic Management Journal
JF - Strategic Management Journal
IS - 6
ER -