Expropriation of Minority Interests and Corporate Diversification in Malaysia

Zuaini Ishak () and Christopher Napier
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Zuaini Ishak: Faculty of Accountancy, Universiti Utara Malaysia, 06010 UUM, Sintok, Kedah
Christopher Napier: School of Management, Royal Holloway, University of London, Egham, Surrey, TW20 OEX, United Kingdom

Asian Academy of Management Journal of Accounting and Finance (AAMJAF), 2006, vol. 2, issue 1, 85-113

Abstract: This study provides evidence on ownership structures and corporate diversification by analysing 355 public listed companies (PLCs) in Malaysia. The majority of the companies in the sample have an ultimate controlling owner, particularly an individual or family. As controlling owners have on average, rights of control over a greater percentage of shares in any given company than their rights to participate in the cash flows from that company, controlling owners may have an incentive to expropriate minority interests through methods such as inefficient corporate diversification. The risk of such expropriation would be expected to be reflected in the value of highly diversified companies. The results of the research provide no evidence to support the argument that diversification reduces the value of companies. However, the finding is consistent with the argument that high control rights of controlling owner might encourage expropriation of minority interests through corporate diversification strategies. Thus, corporate diversification in Malaysia is perceived as a mixed blessing strategy.

Keywords: ownership structure; ultimate owner; corporate diversification; control rights; cash flow rights; Malaysia (search for similar items in EconPapers)
Date: 2006
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