Large shareholders, capital structure and diversification of Malaysian public listed manufacturing firms

The study examines the interaction effects of large shareholders, capital structure and diversification on a firmʹs value. The findings show that diversification is non-linearly related to a firmʹs value. At the lower levels of diversifications, increased diversification is found to improve firm value. However, as the number of diversifications increased, it induces a negative impact on the differences in Tobinʹs Q value. The evidence shows that the interaction terms for diversification and excessive leverage enhance firmsʹ performance suggesting the benefits of diversification in this economy. Further analysis reveals that regardless of the large shareholder-controlling stake, the presence of large shareholders appears to reduce the positive effects of diversification and leverage.