Impact of family altruism on corporate diversification: Does entrenching on the legacy create firm value?

A common feature of the corporate sector of emerging markets like the Philippines is the prevalence of family-controlled conglomerates. This paper explores the effects of corporate diversification on firm value, particularly among family-controlled firms. Using firm-level data on 113 corporations that are listed in the Philippine Stock Exchange, we employ a generalized least squares ramdom effects model to determine the effects of diversification behavior on firm value. Wefind that family owners play a significant role in moderating total diversification tends to go beyond the optimal level, which reduces firm value. By further decomposing total diversification into its unrelated and related forms, we also find that most conglomerates are inclined to diversify to unrelated industries. With such findings, we assert that significant caution must be placed upon the use of unrelated corporate diversification among family firms due to the negative effects brought about by family entrenchment upon firm value