[I examine the capital expenditures of a sample of 700 takeover targets and firms that went private over the period 1972-1987. For the complete sample, I do not find evidence that takeover targets increase their capital expenditures over the four-year period before the acquisition or that they overinvest in capital expenditures relative to several benchmarks. Subsample results provide some evidence of overinvestment in oil and gas firms and large firms. There is no evidence of overinvestment, however, for firms acquired in a hostile takeover or firms that went private. In general, these results are not consistent with the conjecture that takeovers are motivated by the need to reduce excess investment in capital expenditures in target firms.]

The current trend toward corporate focus reverses the diversification trend of the late 1960s and early 1970s. This article examines the value of diversification when many corporations started to diversify. The author finds no evidence that diversified companies were valued at a premium over single segment firms during the 1960s and 1970s. On the contrary, there was a large diversification discount during the 1960s but this discount declined to zero during the 1970s. Insider ownership was negatively related to diversification during the 1960s but, when the diversification discount declined, firms with high insider ownership were the first to diversify.

This paper analyzes the relation between takeover gains and the q rations of targets and bidders for a sample of 704 mergers and tender offers over the period 1972-87. Target, bidder, and total returns are larger when targets have low q ratios and bidders have high q ratios. The relation is strengthened after controlling for the characteristics of the offer and the contest. This evidence confirms the results of the work by L. Lang, R. Stulz, and R. A. Walkling (1989) and shows that their findings also hold for mergers and after controlling for other determinants of takeover gains.

[For a sample of 1163 mutual funds started over the period 1979-1992, we find that fund initiations are positively related to the level of assets invested in and the capital gains embedded in other funds with the same objective, the fund family's prior performance, the fraction of funds in the family in the low range of fees, and the decision by large families to open similar funds in the prior year. In addition, consistent with the presence of scale and scope economies in fund openings, we find that large families and families that have more experience in opening funds in the past are more likely to open new funds.]

[We compare acquisitions completed with and without investment bank advice over the 1981 to 1992 period. We find that the choice to use an investment bank depends on the complexity of the transaction, the type of transaction (takeovers versus acquisitions of assets), the acquiror's prior acquisition experience, and the degree of diversification of the target firm. Although acquisition announcement returns are lower for firms using investment banks, this difference can be explained by differences in transaction characteristics. These results suggest that transaction costs are the main determinant of investment banking choice, followed by contracting costs and asymmetric information costs.]

The valuation effect of diversification is examined for large samples of firms in Germany, Japan, and the United Kingdom for 1992 and 1994. We find no significant diversification discount in Germany, but a significant diversification discount of 10 percent in Japan and 15 percent in the U.K. Concentrated ownership in the hands of insiders enhances the valuation effect of diversification in Germany, but not in Japan or the U.K. For Japan, only firms with strong links to an industrial group have a diversification discount. These findings suggest that international differences in corporate governance affect the impact of diversification on shareholder wealth.

The authors examine data on analyst following for a sample of initial public offerings completed between 1975 and 1987 to see how they related to three well-documented initial public offering (IPO) anomalies. They find that higher underpricing leads to increased analyst following. Analysts are overoptimistic about the earnings potential and long-term growth prospects of recent IPOs. More firms complete IPOs when analysts are particularly optimistic about the growth prospects of recent IPOs. In the long run, IPOs have better stock performance when analysts ascribe low growth potential rather than high growth potential. These results suggest that the anomalies may be partially driven by overoptimism.

[Firms that buy assets in fire sales earn excess returns that are 2 percentage points higher than in regular acquisitions. The mechanism behind this result is the sellers’ reduced bargaining power. We find no difference in real effects or in the combined returns for buyers and sellers between fire sales and regular acquisitions, suggesting that the quality of the match is similar in both types of transactions. The externalities of fire sales for other stakeholders are limited. These results indicate that the welfare losses associated with fire sales are smaller than previously thought.]

[Using a new database, we study fees charged by 46,580 mutual fund classes offered for sale in 18 countries, which account for about 86% of the world fund industry in 2002. We examine management fees, total expense ratios, and total shareholder costs (including load charges). Fees vary substantially across funds and from country to country. To explain these differences, we consider fund, sponsor, and national characteristics. Fees differ by investment objectives: larger funds and fund complexes charge lower fees; fees are higher for funds distributed in more countries and funds domiciled in certain offshore locations (especially when selling into countries levying higher taxes). Substantial cross-country differences persist even after controlling for these variables. These remaining differences can be explained by a variety of factors, the most robust of which is that fund fees are lower in countries with stronger investor protection.]

I examine the capital expenditures of a sample of 700 takeover targets and firms that went private over the period 1972–1987. For the complete sample, I do not find evidence that takeover targets increase their capital expenditures over the four-year period before the acquisition or that they overinvest in capital expenditures relative to several benchmarks. Subsample results provide some evidence of overinvestment in oil and gas firms and large firms. There is no evidence of overinvestment, however, for firms acquired in a hostile takeover or firms that went private. In general, these results are not consistent with the conjecture that takeovers are motivated by the need to reduce excess investment in capital expenditures in target firms.