Bibliographic record
Abstract
The following event study analyzes the effect on the value of the firm's equity of the adoption of a corporate focus strategy in contrast to a diversification strategy. Apparently in accordance with Markowitz's (1952) portfolio theory, companies have adopted the diversifying strategy as their maxim at the time they defined their growing strategy. From the early sixties, huge American corporations as ITT or AT&T made of his incorporating a great quantity of non-related businesses, under the basic assumption that diversification was a value-creation strategy. In Chile, in the late seventies and eighties, the evidence was very similar as financial conglomerates like Angelini or Luksic, attempted to keep under their holding structure many different subsidiaries in the most diverse business areas. Nevertheless, there is no theoretic or empirical evidence that suggests categorically that diversification would create value for a firm or furthermore would increase shareholder wealth. The rationale under portfolio theory is that diversification would reduce unsystematic risk, but would there be any reason for the market to place a premium to those firms who actively diversify if investors are capable to build a diversified portfolio by themselves? This paper will test the hypothesis of value-creation of a corporate focus strategy, verifying the null hypothesis as the absence of abnormal return for shareholders after a restructuring that increases the company's focus degree. Although there is no statistically significant evidence, the tests suggest a relatively small positive abnormal return for the firm that engages in divestitures programs in Chile . I will also appraise this shareholder wealth effect. This conclusion would be consistent with most evidence in overseas. See for example, Alexander, Benson & Kampmeyer (1984), Klein (1986), Comment & Jarrell (1995) or Lang, Poulsen & Stulz (1995), among others. In the first section of this paper we can find the most relevant evidence referred to corporate focus in the last decades. In the second section, I review the theoretical and empirical evidence on corporate focus and diversification, understanding focus as divestitures, spin-offs, split-offs, split-ups or equity carve-outs and the effect of the adoption of such strategies on shareholder wealth. In section three, I discuss the main techniques for measuring corporate focus, such as the Breakup 100 model or the most popular Herfindahl-Hirshman index. In section IV, I expose the determination of the estimated betas for the firms in the sample using the statistical market model and the adjusted market model for unsynchronous transactions with Dimson (1979). In section five, I discuss the results measured as positive abnormal return after the announcement of the adoption of a corporate focus strategy and, finally, I discuss the conclusions.
Fetched live from OpenAlex and de-inverted. Abstracts are not stored in this database: the inverted indexes are 8.6 GB of the frame’s 9.3 GB of text, and the host has 13 GB free.
How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.003 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.001 | 0.001 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.001 | 0.001 |
| Open science | 0.000 | 0.001 |
| Research integrity | 0.000 | 0.001 |
| Insufficient payload (model declined to judge) | 0.006 | 0.001 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".