The Effect of the Board Characteristics and Management Entrenchment on Firm Diversification Strategy

The purpose of this paper is to examine the effect of the board characteristics and the management entrenchment on the diversification strategy at firms listed in Tehran Stock Exchange. In this regard, 110 companies were selected for the period 2008-2014. Panel data method was used to test the hypotheses. In order to examine board characteristics, board size and board independence proxies and to review the management entrenchment, CEO duality, managerial ownership and over investment risk were used. For measuring corporate diversification, Herfindahl and entropy were used. The results show that the size and independence board have negative and positive effects on corporate diversification. This means that company diversification is at high level with large boards and low independent board members. The results show that the CEO duality and the increase of over investment risk have a positive effect on corporate diversification, while managerial ownership has no effect on diversification. The results are consistent with agency theory. According to this theory, the increase in the conflict between shareholders and managers makes the internal managers motivated for opportunistic behavior in order to diversify their enterprise

The Relationship between Investment Decisions and Financing Decisions: Iran Evidence

ABSTRACT The present research will experimentally study the relationship between financing decisions and investment decisions in different economic conditions. Today this issue has been hotly debated in academic circles. This research will investigate and analyze the effects of the financial crisis in the year 2007-2008 on American economy and following that on world's economy on the Iranian economy. Thus, 50 firms Listed in Tehran Stock Exchange during the time period between 2005 and 2010 were studied. Also the present research is trying to control the effect of realized growth, firm size, and dividend policy, accounting return rate, and liquidity on financing decisions. To study the validity of the results of this research, we have used White regression analysis. The results show that the investment decisions have a positive effect on financing decisions in less and high uncertainty condition. This means that the global financial crisis does not affect the relationships between these decisions