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http://hdl.handle.net/2451/27177
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| Title: | Bustup Takeover of Value-Destroying Diversified Firms |
| Authors: | Berger, Philip
Ofek, Eli |
| Issue Date: | Oct-1994 |
| Series/Report no.: | FIN-94-015 |
| Abstract: | Berger and Ofek (1995) confirm recent evidence by Lang and Stulz (1994)
of a value loss from diversification in the 1980s, and use segment-level
data to estimate the magnitude of the loss. They find that, during
1986-1991, the average diversified firm destroyed about 15% of the value
its lines of business would have had if operated as stand-alone
businesses. The evidence that diversification represented a suboptimal
managerial strategy suggests that internal control systems do not
prevent managers from destroying significant amounts of value. The value
destruction does, however, generate large profit opportunities for
outsiders. The natural question that arises is thus whether these profit
opportunities results in takeovers disciplining the managements of firms
with large and persistent value losses from diversification. |
| URI: | http://hdl.handle.net/2451/27177 |
| Appears in Collections: | Finance Working Papers
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