Stakeholder influences on diversification: Implications for shareholders and stakeholders

We develop a rent appropriation perspective to study the relationship between ownership structure and the performance outcomes of corporate diversification. We contend that differences in the performance goals of domestic relational owners and foreign transactional owners in Japanese corporations have implications for the performance benefits of diversification both for shareholders and for stakeholders. Transactional ownership strengthens the association between corporate diversification and profit, while relational ownership strengthens the association between corporate diversification and growth. Further, stakeholders in a firm, such as its employees and executives, benefit more from the growth benefits of diversification undertaken by firms with relational owners than the profit benefits of diversification by firms with transactional owners.