Causes and effects of corporate refocusing programs |
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| Authors: | Berger PG; Ofek E |
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| Institution: | 1 New York University, USA
z Corresponding author at: Sloan School of Management, MIT, 50 Memorial Drive, E52-325, Cambridge, MA 02142-1347, USA. E-mail: pberger@mit.edu |
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| Abstract: | We study the precursors and outcomes of refocusing episodesby 107 diversified firms that were not taken over between 1984and 1993. These firms had more value-reducing diversificationpolicies than diversified firms that did not refocus. However,major disciplinary or incentive-altering events (including managementturnover, outside shareholder pressure, changes in managementcompensation, and financial distress) usually occurred beforerefocusing took place. The cumulative abnormal returns overa firm's refocusing-related announcements averaged 7.3% andwere significantly related to the amount of value reductionassociated with the refocuser's diversification policy. |
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