|
Archive@NYU >
Stern School of Business >
Finance Working Papers >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27112
|
| Title: | Causes and Effects of Corporate Refocusing Programs |
| Authors: | Berger, Philip G.
Ofek, Eli |
| Issue Date: | Nov-1995 |
| Series/Report no.: | FIN-95-012 |
| Abstract: | We provide evidence that corporate refocusing are motivated, in part, by
the desire to enhance shareholder value, but that it is often necessary
for agency problems to be reduced before managers will begin divestiture
programs. Diversified firms that refocus have significantly greater
value losses from their diversification policies than multisegment firms
that do not refocus. Major events of market discipline usually must
occur, however, before managers attempt to undo suboptimal
diversification programs, whereas the same events occur only rarely for
a matched sample of nonrefocusing firms during the same time frame.
Refocusing firms have a high frequency of CEO changes, and also often
have new outside blockholders, unsuccessful takeover bids, and signs of
financial distress in the period preceding their divestitures. Finally,
we find that the cumulative abnormal returns over all of the
refocusing-related announcements of a refocusing firm average 7.3%, and
that these abnormal returns are significantly related to the amount of
value that was being destroyed by the refocuser’s diversification policy. |
| URI: | http://hdl.handle.net/2451/27112 |
| Appears in Collections: | Finance Working Papers
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
