Document Type
Article
Source of Publication
International Review of Economics & Finance
Publication Date
1-20-2025
Abstract
In this study, we examine whether managers of diversified firms make efficient labor investment decisions. Using a sample of 36,102 firm-year observations over the period 1989–2021, we find that managers of diversified firms make inefficient labor investment decisions. This finding is robust to a battery of sensitivity tests, alternative model specifications, and endogeneity concerns. We further document that the positive relationship between diversification and inefficient labor investment is long lasting, but is attenuated when managers of diversified firms are granted equity incentives. Our results suggest that self-seeking managers may strategically use diversification to obfuscate their suboptimal behaviors. Overall, our findings provide valuable insights into the complexities of resource allocation strategies and contribute to a broader understanding of corporate decision-making.
DOI Link
ISSN
Publisher
Elsevier BV
First Page
103893
Last Page
103893
Disciplines
Business
Keywords
Managerial equity incentives, Labor investment decisions, Diversification, Corporate decision-making, Resource allocation strategies
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Recommended Citation
Akter, Aysha; Khalifa, Mariem; and Sualihu, Mohammed Aminu, "Diversified firms and corporate labor policy: The role of managerial equity incentives" (2025). All Works. 7023.
https://zuscholars.zu.ac.ae/works/7023
Indexed in Scopus
no
Open Access
yes
Open Access Type
Hybrid: This publication is openly available in a subscription-based journal/series