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.
| Original language | English |
|---|---|
| Peer-reviewed scientific journal | Review of Financial Studies |
| Volume | 20 |
| Issue number | 3 |
| Pages (from-to) | 557-595 |
| Number of pages | 29 |
| ISSN | 0893-9454 |
| DOIs | |
| Publication status | Published - 01.05.2007 |
| MoE publication type | A1 Journal article - refereed |
Keywords
- 512 Business and Management