TY  - JOUR
AU  - Schlingemann,Frederik P.
AU  - Stulz,Rene M.
AU  - Walkling,Ralph A.
TI  - Corporate Focusing and Internal Capital Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7175
PY  - 1999
Y2  - June 1999
UR  - http://www.nber.org/papers/w7175
L1  - http://www.nber.org/papers/w7175.pdf
N1  - Author contact info:
Frederik P. Schlingemann
Katz Graduate School of Business
University of Pittsburgh
372 Mervis Hall
Pittsburgh, PA 15260
E-Mail: schlinge@katz.pitt.edu

Rene M. Stulz
The Ohio State University
Fisher College of Business
806A Fisher Hall
Columbus, OH 43210-1144
Tel: 614/292-1970
Fax: 614/292-2359
E-Mail: stulz_1@cob.osu.edu
AB  - A sample of firms that focus by divesting at least one segment allows us to investigate the characteristics of segments divested as well as the nature of focusing firms. We find that firms are more likely to divest segments unrelated to the core activities of the firm and that the probability that a segment is divested is inversely related to its relative size within the firm. In fact, a segment's relative size is the variable that has the most explanatory power in predicting which segment a firm divests. We argue that this is consistent with the importance of asset market liquidity as a determinant of the divestiture decision. Financial constraints play an important role in determining which firms focus, which segments these firms divest, and in the market's reaction to divestiture announcements. Focusing firms perform less well and invest significantly less than  heir non-focusing counterparts.
ER  -