The dissertation involves an analysis of the impact of diversification and focus on acquiring and target firms through a study of acquisitions of property-liability insurers. The dissertation investigates both the motivations underlying the decision to diversify or focus and the impact of that decision. The definition of diversification and focus allows for the detection of diversification into an industry and diversification within an industry. The framework utilized in the dissertation recognizes that the analysis of the implications of diversification and focus acquisitions is a two step process. First, the acquirer decides to diversify or focus. That decision then potentially impacts the performance and capitalization of the firms. Failure to link the decision to diversify or focus to the impact of that choice on performance and capitalization may bias the interpretation of the impact of diversification and focus. Using a treatment effects methodology, the dissertation controls for the possibility that acquirers self-select into diversification and focus acquisitions based on their pre-acquisition characteristics.; Chapter Three of the dissertation analyzes the impact of diversification and focus on the acquirers. The results based on the acquirers' decisions to diversify or focus support the hypothesis that diversification acquirers are motivated to smooth earnings through the acquisitions. When the potential for self-selection bias is controlled for in the treatment effects models, diversification and focus is not significantly related to changes in the acquirers' performance and capitalization.; Chapter Four analyzes the impact of diversification and focus on the target firms. These tests center on whether the acquirer achieves its goals through the selection of a specific type of target firm and/or through making systematic changes in the targets operations and capitalization after the acquisition. Based on the motivations outlined in Chapter Three, it appears that the acquirers select a target firms with the financial and operating characteristics to meet those goals. The analysis does not find support for hypotheses that suggest changes in the performance and capitalization of the targets are related to the diversification or focus aspect of the acquisition.
展开▼
