Firms that alter their divisional configurations on average increase shareholder wealth. Gains appear to come from information about investment opportunities and increases in efficiency. Performance before the restructurings suggests poorly organized firms are motivated by market pressures to change their organizations. Change also occurs in healthy firms as part of the growth process. Restructuring often occurs where there is no evidence of takeover threats. While stock prices increase around the restructurings, there is a contemporaneous decline in earnings due to increased expenses. These findings appear inconsistent with the contention that the market pressures managers into focusing on short-run earnings.

This paper demonstrates that the market reaction to announcements of seasoned stock offerings varies with the presence of outside agents - accounting firms, commercial banks, and underwriters - who monitor the firm. The stock price reaction is a positive function of the quantity of bank debt in a firm's financial structure, the quality of the firm's investment banker, and the quality of the public accounting firm that serves as its external auditor. The evidence supports theoretical models that imply external agents audit, monitor, and certify decisions to issue seasoned common stock.