Abstract
During the 1980s, many diversified firms reduced their diversification by refocusing. This study examined whether this refocusing created market value for the companies involved. It is shown that refocusing announcements are associated with significant, positive abnormal returns, which implies that firm diversification levels prior to refocusing were higher than optimal.
REFERENCES
- 1988. Ability, moral hazard, firm size, and diversification. Band Journal of Economics, 19: 72–87. Google Scholar
- 1971. Corporate growth and diversification. Journal of Law and Economics, 14: 371–383. Google Scholar
- 1990. Hostile takeovers in the 1980s: The return to corporate specialization. In Baily M. N.Winston C. (Eds.), Brookings Papers on Economic Activity: Microeconomics 1990: 1–84. Washington, DC: Brookings Institution. Google Scholar
- 1989. The causes and consequences of hostile takeovers. Unpublished doctoral dissertation, Harvard University Graduate School of Business Administration, Boston, MA. Google Scholar
- 1985. Using daily stock returns: The case of event studies. Journal of Financial Economics, 14: 3–31. Google Scholar
- Business Week. 1985. Breakup value is Wall Street's new buzzword. July 8: 80–81. Google Scholar
- 1978. Supervision, loss of control, and the optimum size of the firm. Journal of Political Economy, 86: 943–952. Google Scholar
- 1971. International corporations: The industrial economics of foreign investment. Economica, 38: 1–28. Google Scholar
- 1990. Voluntary restructuring: The case of General Mills. Journal of Financial Economics, 27: 117–141. Google Scholar
- 1986. The acquisition integration process. Academy of Management Best Papers Proceedings: 12–16. Google Scholar
- 1976. The option pricing model and the risk factor of stock. Journal of Financial Economics, 3: 53–82. Google Scholar
- 1962. Diversification and integration in American industry. Princeton, NJ: National Bureau of Economic Research. Google Scholar
- 1980. Corporate growth strategies. Journal of Business Strategy, 1(2): 56–62. Google Scholar
- 1991. Are institutional investors myopic? A time-series study of four technology-driven industries. Strategic Management Journal, 12: 1–16. Google Scholar
- 1987. Strategy and structure in the multiproduct firm. Academy of Management Review, 12: 331–341.Link , Google Scholar
- 1988. Strategic control systems and relative R&D investment in large multiproduct firms. Strategic Management Journal, 9: 605–621. Google Scholar
- 1990. Antecedents and performance outcomes of diversification: A review and critique of theoretical perspectives. Journal of Management, 16: 461—509. Google Scholar
- 1990. Corporate restructuring: Governance and control limits of the internal capital market. Academy of Management Review, 15: 459–477.Link , Google Scholar
- 1969. The conglomerate corporation. Center Magazine, 2(4): 7–14. Google Scholar
- 1988. The market for corporate control: The empirical evidence since 1980. Journal of Economic Perspectives, 2(1): 49–68. Google Scholar
- 1989. Going back to basics seems to be a smart move. Business Week, November 20: 22. Google Scholar
- 1986. Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, Papers and Proceedings of the
98th Annual Meeting of the American Economic Association , 76: 323–329. Google Scholar - 1976. Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3: 305–360. Google Scholar
- 1983. The internal organization of the firm and the shape of average costs. Bell Journal of Economics, 14: 474–486. Google Scholar
- 1967. Why do mergers miscarry? Harvard Business Review, 45(6): 84–101. Google Scholar
- 1971. A pure financial rationale for the conglomerate merger. Journal of Finance, 26: 521–537. Google Scholar
- 1990. Want more productivity? Kill that conglomerate. Wall Street Journal, January 16: A16. Google Scholar
- 1985. The effect of voluntary spin-offs on stock prices: The anergy hypothesis. Advances in Financial Planning and Forecasting, 1: 265–291. Google Scholar
- 1973 Conglomerate enterprise and public policy. Boston: Harvard University Graduate School of Business Administration. Google Scholar
- 1990. Corporate refocusing and economic performance, 1981-1987. Unpublished doctoral dissertation, Harvard University Graduate School of Business Administration, Boston. Google Scholar
- 1988. Corporate divestitures: Survey of the literature and future research directions for business policy. Working paper no. 89-011, Harvard University Graduate School of Business Administration, Boston. Google Scholar
- 1988. Diversification, Ricardian rents, and Tobin's Q. Rand Journal of Economics, 19: 623–632. Google Scholar
- 1989. Do managerial objectives drive bad acquisitions? Unpublished manuscript, University of Chicago. Google Scholar
- 1972. A life cycle theory of the firm. Journal of Industrial Economics, 20: 199–219. Google Scholar
- 1987. The corporation: Growth, diversification and mergers. London: Harwood Academic Publishers. Google Scholar
- 1985. Diversification strategy, profit performance, and the entropy measure. Strategic Management Journal, 6: 239–255. Google Scholar
- 1959. The theory of the growth of the firm. Oxford, England: Blackwell. Google Scholar
- 1986. The dominant logic: A new linkage between diversity and performance. Strategic Management Journal, 7: 485–501. Google Scholar
- 1987. Mergers, sell-offs and economic efficiency. Washington, DC: Brookings Institution. Google Scholar
- 1973. The effect of diversification on industry profit performance in 241 manufacturing industries: 1963. Review of Economics and Statistics, 55: 146–155. Google Scholar
- 1986. The hubris hypothesis of corporate takeovers. Journal of Business, 59: 197–216. Google Scholar
- 1983. Evidence on the capitalized value of merger activity for acquiring firms. Journal of Financial Economics, 11: 85–119. Google Scholar
- 1990. The takeover wave of the 1980s. Science, 249: 745–749. Google Scholar
- 1982. Towards an economic theory of the multiproduct firm. Journal of Economic Behavior and Organization, 3: 39–63. Google Scholar
- 1989. The impact of public policy on corporate strategy: Taxes, antitrust policy and diversification clienteles. Working paper, Texas A&M University, Department of Management, College Station, TX. Google Scholar
- 1988. Conglomerates revisited. Strategic Management Journal, 9: 403–414. Google Scholar
- 1964. The economics of discretionary behavior: Managerial objectives in a theory of the firm. Englewood Cliffs, NJ: Prentice-Hall. Google Scholar
- 1967. Hierarchical control and optimum firm size. Journal of Political Economy, 75: 123–138. Google Scholar
- 1975. Markets and hierarchies: Analysis and antitrust implications. New York: Free Press. Google Scholar