Why Diversification Has A Relationship With Csp

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In addition, Clarkson (1995) argues that some of corporate responsibilities to stakeholders are also related to social concern from society’s perspective. Furthermore, Brammer et al. (2006) state CSP has become principal component of business organization performance since a firm undertaking intense pressure from stakeholders, such as customers, employees, and socially responsible investors, to show their commitment and contribution to society in social and environmental issue. Hence, we may argue that CSP is a performance measurement which reflects firm’s response toward stakeholder demands and social issues that relates to long term performance. Furthermore, Kang (2013) asserts that there are several reasons why diversification has a…show more content…
Third, diversification strategy may reduce managerial employment risk. Risk reduction in managerial employment on diversified firm occurs in two ways, including reducing firm bankruptcy risk and management entrenchment (Alesón & Escuer, 2002). Thus it may reduce variance of future cash flow (Martin & Sayrak, 2003). (Kang, 2013; Shleifer & Vinishny, 1989), (Shleifer & Vinishny, 1989). Finally, a diversified firm can share the cost and benefit of CSP-related investments across their subsidiaries (McWilliams & Siegel, 2001). Consequently, a diversified firm has a stronger economic encouragement to invest in social issues. Hence, from the discussion above, we may argue that corporate diversification has a relationship with CSP.
According to several prior studies, industry or product diversification might be classified into two forms, including related diversification and unrelated diversification (Chang, Oh, Jung, & Lee, 2012; Chen & Yu, 2012; Hashai, 2015; Oh, Sohl, & Rugman, 2015; Palepu, 1985; Su & Tsang, 2015; Zahavi & Lavie, 2013). Related diversification refers to diversification strategy which associates to expanding business in a similar product or in the same product line (backward or forward integration) (Chen & Yu, 2012). On the other hand, according to Castañer and Kavadis (2013) unrelated diversification refers to a diversification strategy that extent the firm operation into a different
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