Managerial Ownership and Corporate Diversification: A Longitudinal Examination

Strategic Management Journal, 28(3): 211-225, 2007

15 Pages Posted: 25 Jan 2014

See all articles by Maria L. Goranova

Maria L. Goranova

University of Wisconsin - Milwaukee

Todd Alessandri

Northeastern University - International Business & Strategy

Pamela M. Brandes

Syracuse University

Ravi Dharwadkar

Syracuse University - Whitman School of Management

Date Written: January 30, 2007

Abstract

Strategy and finance research suggests that managerial ownership results in increased incentive alignment and therefore is negatively related to corporate diversification. Using a longitudinal approach, we develop arguments to examine whether managerial ownership is associated with subsequent changes in diversification and/or if diversification is associated with subsequent changes in ownership. The results indicate that levels of managerial ownership in one time period are not associated with subsequent changes in corporate diversification, which raises incentive alignment questions. We also find that higher levels of corporate diversification are associated with changes in managerial ownership, which suggests support for the employment risk-reduction perspective. This study provides important reasons to reassess the longitudinal implications of the managerial ownership-corporate diversification link from both theoretical and managerial perspectives.

Keywords: corporate diversification, managerial ownership, incentive alignment

JEL Classification: G3

Suggested Citation

Goranova, Maria L. and Alessandri, Todd and Brandes, Pamela M. and Dharwadkar, Ravi, Managerial Ownership and Corporate Diversification: A Longitudinal Examination (January 30, 2007). Strategic Management Journal, 28(3): 211-225, 2007, Available at SSRN: https://ssrn.com/abstract=2384649

Maria L. Goranova (Contact Author)

University of Wisconsin - Milwaukee ( email )

P.O. Box 742
3202 N. Maryland Ave.
Milwaukee, WI 53201-0742
United States

Todd Alessandri

Northeastern University - International Business & Strategy ( email )

Boston, MA 02115
United States

Pamela M. Brandes

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

Ravi Dharwadkar

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244-2130
United States

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