Document Type
Journal Article
Publication Title
Vision
Publisher
Sage
School
School of Business and Law
Abstract
This study reconceptualizes the so far inconclusive relationship between unrelated diversification and financial performance by explaining how coordination costs can shape the amount of free cash flow and related agency problems at different levels of unrelated diversification. The study builds upon the notion that coordination requirements and associated coordination costs will vary at levels of unrelated diversification to regulate the amount of free cash flow managers will have at their disposal at each level of unrelated diversification. Based on the agency costs associated with free cash flow, we conceptualize that at different stages of unrelated diversification, the degree of managerial misuse of free cash flow can create different performance implications of the unrelated diversified firm to explain a proposed S-shaped relationship.
DOI
10.1177/09722629241264429
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
Comments
This is an Author's Accepted Manuscript version of an article published by SAGE in Vision. The published article is available at https://doi.org/10.1177/09722629241264429
Gyan, K. A. (2024). Levels of unrelated diversification and firm performance: A conceptual description of an s-shaped hypothesis. Vision. Advance online publication. Copyright © 2024 (SAGE). DOI: 10.1177/09722629241264429