Corporate Governance, Diversification, and Firm Value: Evidence from 'Spin-Ins'

40 Pages Posted: 21 Aug 2011

See all articles by Yoon K. Choi

Yoon K. Choi

University of Central Florida - College of Business Administration - Department of Finance

Seung Hun Han

Korea Advanced Institute of Science and Technology (KAIST) - Department of Management Science

Date Written: August 20, 2011

Abstract

We analyze the impact of corporate restructuring on firm value using a unique internal corporate restructuring created between the years of 2001 and 2003 in Japan. We show that excess value significantly increases after the internal restructuring even when the degree of diversification has not changed. This result supports the argument that diversification itself may not drive “discounts” or “premiums.”

We also explore these events to examine the effect of bank governance and keiretsu affiliation. Our results are consistent with the argument that recent Japanese restructuring reduces information asymmetries and agency problems, thus improving the efficiency of internal capital markets and firm value.

Keywords: Internal restructuring, Corporate Governance, keiretsu, Internal Capital Markets

JEL Classification: G34; G38

Suggested Citation

Choi, Yoon K. and Han, Seung Hun, Corporate Governance, Diversification, and Firm Value: Evidence from 'Spin-Ins' (August 20, 2011). 24th Australasian Finance and Banking Conference 2011 Paper, Available at SSRN: https://ssrn.com/abstract=1913453 or http://dx.doi.org/10.2139/ssrn.1913453

Yoon K. Choi (Contact Author)

University of Central Florida - College of Business Administration - Department of Finance ( email )

PO Box 161400
Orlando, FL 32816
United States
(407) 823-5023 (Phone)

Seung Hun Han

Korea Advanced Institute of Science and Technology (KAIST) - Department of Management Science ( email )

291 Daehak-ro(373-1 Guseong-dong), Yuseong-gu
Daejeon, 305-701
Korea, Republic of (South Korea)

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