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    Benefits or costs? The effects of diversification with cross-industry knowledge on corporate value under crisis situation

    88042.pdf (1.116Mb)
    Access Status
    Open access
    Authors
    Li, Zhi
    Wei, Jiuchang
    Marinova, Dora
    Tian, Jingjing
    Date
    2020
    Type
    Journal Article
    
    Metadata
    Show full item record
    Citation
    Li, Z. and Wei, J. and Marinova, D. and Tian, J. 2020. Benefits or costs? The effects of diversification with cross-industry knowledge on corporate value under crisis situation. Journal of Knowledge Management. 25 (1): pp. 175-226.
    Source Title
    Journal of Knowledge Management
    DOI
    10.1108/JKM-11-2019-0659
    ISSN
    1367-3270
    Faculty
    Faculty of Humanities
    School
    School of Design and the Built Environment
    Remarks

    This is an author-created, un-copyedited version of an article accepted for publication in Journal of Knowledge Management.

    URI
    http://hdl.handle.net/20.500.11937/88220
    Collection
    • Curtin Research Publications
    Abstract

    Purpose: This paper aims to explore the explanations of “information effect” and “agency effect” of corporate diversification with cross-industry knowledge under a crisis situation.

    Design/methodology/approach: Based on an event study of 203 public companies’ crises in China between 2008 and 2018, the authors verify the information and agency effects of corporate diversification under a crisis situation by, respectively, examining the effects of interactions of corporate unrelated diversification with corporate transparency and knowledge deficiency attribution on the stock market’s responses to the crises.

    Findings: It is found that corporate unrelated diversification serves as a buffer in protecting firm value while attribution of knowledge deficiency can be a burden. The buffering effect is stronger when the corporate transparency is higher but weaker when the crisis is attributed to be caused by corporate tacit knowledge deficiency.

    Practical implications: Unrelated diversified firms should strengthen information communication with stakeholders so as to break down the stakeholders’ cross-industry knowledge barriers, and thus protect their own value at the crisis’ onset. Also, they can further buffer the loss by reducing stakeholders’ perceptions of the corporate tacit knowledge deficiency revealed in the crisis.

    Originality/value: This study is the first to illustrate that the information and agency effects of corporate diversification strategy can be partially explained under a crisis situation, which provides meaningful insights about how firms can conduct knowledge management in their daily operations to deal better with corporate crises.

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