Journal of Corporate Finance Vol. 12 No. 4 2006
The effect of agency costs on the value of single-segment and multi-segment firms
Abstract
This paper investigates the effectiveness of equity-based compensation in mitigating the effects of agency costs on the valuation of single-segment and multi-segment firms. In a sample of 4182 firm-year observations during the period 1993–1998, we find that firms with high equity-based compensation have higher valuation than firms with low equity-based compensation. This is true in both single-segment and multi-segment firms. The effect of equity-based compensation for multi-segment firms, where agency costs are expected to be higher, is much greater than for single-segment firms. Also, the negative value-effect of diversification is less for firms with high equity-based compensation.
- DOI
- 10.1016/j.jcorpfin.2005.06.003
- Volume
- 12
- Issue
- 4
- Pages
- 761-782
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref