| This dissertation consists of three studies in the field of corporate strategy. Chapter 1 investigates "legacy" divestitures, the sale or spinoff of a company's historical core business. Operating performance deteriorates in the years following legacy divestitures, and this decline appears to be linked to a loss of intangible resources embedded in legacy businesses, as well as to a disruption of synergies between legacy businesses and other units within the divesting firms. These results illustrate the challenges associated with divestitures that impact firms' resources in unexpected ways and shed light on the difficulties firms may experience when they attempt to overhaul their identities.;Chapter 2 (co-authored with Cynthia Montgomery) considers how the combination of business expertise and share ownership in Fortune 500 directors affects corporate value. Specifically, this work focuses on directors with large shareholdings and comparatively low levels of managerial expertise, whose positions on boards may be due to legacy rather than to high-level business experience. The presence of such directors is associated with lower firm value, and this effect becomes more pronounced the larger the shareholdings owned by these individuals. These results raise new questions about the talent at the table in corporate boardrooms and the cost to shareholders of directors who are highly motivated but can't deliver.;Chapter 3 (co-authored with Stuart Gilson and Belen Villalonga) investigates equity analysts' coverage of pending corporate spinoffs, a setting in which analysts' ability to inform investors is potentially very high. Analysts pay little attention to subsidiaries about to be spun off, even though they constitute a significant part of the parent company operations. Moreover, while the level of detail in analyst research about parent companies is significantly related to forecast accuracy, the same is not true for the subsidiaries; additionally, inaccuracy in subsidiary earnings forecasts is associated with inaccuracy in the parent estimates. The forecast errors documented in this chapter exceed those previously found in the context of other restructuring transactions, such as IPOs, mergers, and bankruptcies, suggesting that the complexity associated with spinoffs, combined with analysts' apparent disregard for subsidiaries, seem to limit analysts' ability to add value as information intermediaries in this setting. |
