Causes and Effects of Corporate Refocusing Programs

42 Pages Posted: 7 Nov 2008

See all articles by Philip G. Berger

Philip G. Berger

University of Chicago

Eli Ofek

New York University (NYU) - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: August 1997


We study the precursors and outcomes of refocusing episodes by diversified firms that were not taken over. Those that refocus have more value-reducing diversification policies than those not refocusing. Major disciplinary or incentive-altering events (including management turnover, outside shareholder pressure, changes in management compensation, and financial distress) usually must occur, however, before managers refocus. Consistent with divestitures reversing, at least in part, value destruction from unsuccessful diversification strategies, the cumulative abnormal returns over a firm's refocusing-related announcements average 7.3%, and are significantly related to the amount of value-reduction associated with the refocuser's diversification policy.

Suggested Citation

Berger, Philip G. and Ofek, Eli, Causes and Effects of Corporate Refocusing Programs (August 1997). NYU Working Paper No. FIN-98-008, Available at SSRN:

Philip G. Berger (Contact Author)

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Eli Ofek

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

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