Review of Financial Studies Vol. 20 No. 3 2007
Spin-offs, Divestitures, and Conglomerate Investment
Abstract
We examine whether spin-offs or divestitures cause improvements in conglomerate investment efficiency. At issue are endogeneity of these restructuring decisions and correct measurement of investment efficiency. Endogeneity is a problem because the factors that induce firms to spin off or divest divisions may also improve investment efficiency; measurement error is a problem because efficiency measures employ Tobin’s q as a noisy proxy for investment opportunities. We find important differences between firms that divest or spin off and a control sample. After accounting for these differences and for measurement error in q, we find no evidence of improvements in investment efficiency.
- DOI
- 10.1093/rfs/hhl022
- Volume
- 20
- Issue
- 3
- Pages
- 557-595
- Language
- en
- Sources
- openalex crossref