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Spin-offs, divestitures, and conglomerate investment
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. © The Author 2006.
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- Published
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- Accepted version
Journal
Review of Financial StudiesISSN
0893-9454Publisher
Oxford University PressExternal DOI
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3Volume
20Page range
557-595Department affiliated with
- Accounting and Finance Publications
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- Yes
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- Yes
Legacy Posted Date
2022-02-22First Open Access (FOA) Date
2022-02-22First Compliant Deposit (FCD) Date
2022-02-21Usage metrics
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