Review of Financial Studies Vol. 12 No. 2 1999

Causes and Effects of Corporate Refocusing Programs

Philip G. Berger^1,2,3; Eli Ofek⁴

¹ Massachusetts Institute of Technology · ² Pennsylvania Institute of Technology · ³ University of Chicago · ⁴ New York University

Abstract

We study the precursors and outcomes of refocusing episodes by 107 diversified firms that were not taken over between 1984 and 1993. These firms had more value-reducing diversification policies than diversified firms that did not refocus. However, major disciplinary or incentive-altering events (including management turnover, outside shareholder pressure, changes in management compensation, and financial distress) usually occurred before refocusing took place. The cumulative abnormal returns over a firm's refocusing-related announcements averaged 7.3% and were significantly related to the amount of value reduction associated with the refocuser's diversification policy.

DOI

10.1093/rfs/12.2.311

Volume

12

Issue

2

Pages

311-345

Language

en

Sources

openalex crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓