Spin-offs, Divestitures, and Conglomerate Investment

Gonul Colak, Toni M. Whited

Research output: Contribution to journalArticleScientificpeer-review

93 Citations (Scopus)


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.
Original languageEnglish
Peer-reviewed scientific journalReview of Financial Studies
Issue number3
Pages (from-to)557-595
Number of pages29
Publication statusPublished - 01.05.2007
MoE publication typeA1 Journal article - refereed


  • 512 Business and Management


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