Causes and Effects of Corporate Refocusing
Posted: 8 Dec 1998
University of Chicago - Booth School of Business
New York University (NYU) - Department of Finance
Abstract
We study the precursors and outcomes of refocusing episodes by 107 diversified firms that were not taken over between 1984 and 1993. These firms had more value-reducing diversification policies than diversified firms that did not refocus. However, major disciplinary or incentive-altering events (including management turnover, outside shareholder pressure, changes in management compensation, and financial distress) usually occurred before refocusing took place. The cumulative abnormal returns over a firm's refocusing-related announcements averaged 7.3%, and were significantly related to the amount of value-reduction associated with the refocuser's diversification policy.
JEL Classification: G31, G32
Suggested Citation:
Suggested Citation
Berger, Philip G. and Ofek, Eli, Causes and Effects of Corporate Refocusing. Review of Financial Studies, Vol. 12, Issue 2. Available at SSRN: https://ssrn.com/abstract=140414
