Corporate Refocusing

Costas Markides

21 citations0/0 files storedLondon Business School Review

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Corporate Finance and Governance Organizational Downsizing and Restructuring Organizational Management and Leadership

Abstract

During the 1980s, many conglomerates and other diversified firms reduced their diversification by refocusing on their core businesses. This paper provides an economic explanation for this phenomenon. It is argued that: (a) refocusing represents the natural response of firms to a more volatile external environment and a more competitive capital market; and (b) over‐diversified firms that refocus will achieve improved profitability and a higher market value, and will thus protect themselves from hostile takeover.

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References

1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1996Agency costs of free cash flow, corporate finance, and takeovers 1986The Hubris Hypothesis of Corporate Takeovers 1986The dominant logic: A new linkage between diversity and performance 1971International Corporations: The Industrial Economics of Foreign Investment 1982Towards an economic theory of the multiproduct firm 1975Strategy, structure, and economic performance 1995Corporate focus and stock returns

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