Corporate Governance, Diversification, and Firm Value: Evidence from 'Spin-Ins'

We analyze the impact of corporate restructuring on firm value using a unique internal corporate restructuring created between the years of 2001 and 2003 in Japan. We show that excess value significantly increases after the internal restructuring even when the degree of diversification has not changed. This result supports the argument that diversification itself may not drive “discounts” or “premiums.” We also explore these events to examine the effect of bank governance and keiretsu affiliation. Our results are consistent with the argument that recent Japanese restructuring reduces information asymmetries and agency problems, thus improving the efficiency of internal capital markets and firm value.