Corporate strategy and shareholder value during decline and turnaround

• Main Authors: Furrer, O., Pandian, J.R., Thomas, Howard
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2007
• Subjects: Corporate strategy; Shareholder value analysis; Turnarounds; Business
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3944
• Institution: Singapore Management University

Purpose – The paper aims to assess the impact of corporate strategy on shareholder value in decline and turnaround situations. Design/methodology/approach – A sample of 45 turnaround firms was selected and matched against a control sample which did not face continuous decline over the time period studied. The impact of corporate strategy on shareholder value was tested using cumulative beta excess return measures to capture the long-term basis of corporate strategy. Findings – The paper finds that the beta excess return measures captured the hypothesized relationships between strategy and shareholder value for the sample firms studied. Practical implications – Beta excess return measures are superior to case studies or event studies for identifying the long-term effects of corporate strategy. Originality/value – Relatively few studies have compared the strategies of turnaround firms with a matched sample of non-declining firms. The use of cumulative beta excess returns to assess long-term valuation of corporate strategy is original.