De-Diversification Activities of German Corporations From 1988 To 2002: Perspectives from Agency and Management Fashion Theory

In the past, many countries have witnessed de-diversification waves. In this paper we illustrate that the same phenomenon can be observed in Germany. We discuss different theoretical explanations for the occurrence of de-diversification: the predominant agency theory approach and the less common neo-institutionalist/management fashion theory. We present data on 360 divestitures by German corporations between 1988 and 2002 and obtain additional data from a literature database. The results show that management fashions can influence the impact of capital markets. We suggest strengthening the link between finance theory and research in strategy and organization.