Within diversified firms, the negative impact of leverage on investment is significantly greater for high q than for low q segments and significantly greater for non-core than for core segments. This differs substantially from focused firms and is consistent with the view that diversified firms allocate a disproportionate share of their debt service burden to their higher q and non-core segments. We also find that, among low-growth firms, the positive relation between leverage and firm value is significantly weaker in diversified firms than in focused firms. We conclude that the disciplinary benefits of debt are partially offset by the additional managerial discretion in allocating debt service that is provided by the diversified organizational structure.

We examine the incidence of disciplinary events that reduce the control of current managers, and corporate restructuring among firms experiencing a large decline in operating performance during an active takeover period (1985–1988) and a less active period (1989–1992). We document a significant decline in the disciplinary events from the active to the less active period that is driven by a significant decline in disciplinary takeovers, those takeovers that result in a top executive change. Following the performance decline, however, there is a substantial amount of corporate restructuring, and a significant improvement in operating performance, during both the active and the less active takeover period. We conclude that, although some managerial disciplinary events are related to overall takeover activity, the decline in takeover activity does not result in fewer performance-enhancing restructurings following performance declines.

We examine the equity ownership structure and board composition of a sample of 583 firms over the ten-year period 1983–1992. Our evidence suggests that a substantial fraction of firms exhibit large changes in ownership and board structure in any given year. These changes are correlated with one another and are not reversed in subsequent years. Ownership and board changes are strongly related to top executive turnover, prior stock price performance, and corporate control threats, but only weakly related to changes in firm-specific determinants of ownership and board structure. Furthermore, large ownership changes are typically preceded by economic shocks and followed by asset restructurings.

In the US, Canada, UK, Germany, France, and Japan, the propensity to pay dividends is higher among larger, more profitable firms, and those for which retained earnings comprise a large fraction of total equity. Although there are hints of reductions in the propensity to pay dividends in most of the sample countries over the 1994–2002 period, they are driven by a failure of newly listed firms to initiate dividends when expected to do so. Dividend abandonment and the failure to initiate by existing nonpayers are economically unimportant except in Japan. Moreover, in each country, aggregate dividends have not declined and are concentrated among the largest, most profitable firms. Finally, outside of the US there is little evidence of a systematic positive relation between relative prices of dividend paying and non-paying firms and the propensity to pay dividends. Overall, these findings cast doubt on signaling, clientele, and catering explanations for dividends, but support agency cost-based lifecycle theories.