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RESEARCH PRODUCT
Behind the curtain of international diversification: An agency theory perspective
Claudio GiachettiPasquale Massimo PiconeGiovanni Battista DagninoMaurizio La Roccasubject
growth opportunitiesFree cash flowFinancial economicsdebt; free cash flow; growth opportunities; international diversification; ownership concentration;Strategy and Managementmedia_common.quotation_subject05 social sciencesAgency costDiversification (finance)Principal–agent problemSettore SECS-P/08 - Economia e Gestione delle Impreseinternational diversificationinternational diversification; free cash flow; debt; ownership concentration; growth opportunitiesShareholderownership concentrationManagerial discretionDebt0502 economics and businessfree cash flow050211 marketingBusinessBusiness and International Managementdebt050203 business & managementmedia_commondescription
This paper dissects the antecedents of international diversification through the lens of the agency cost of free cash flow arguments. It explores whether the partial convergence of interests among managers, majority shareholders, and minority shareholders affects a firm's choice to diversify internationally. Using a sample panel of 60 Italian firms evaluated longitudinally from 2004 to 2014, the study tests whether a firm's international diversification is affected by its free cash flow (as the ultimate source of managerial discretion) and debt (as the main constraint to managerial discretion), especially in firm contexts that exacerbate agency problems. We find that the effects on international diversification of free cash flow and debt are contingent on ownership concentration, family control, and growth opportunities.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2018-08-29 |