Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 7 (2018), No. 1, Pages 1-19

DOI: 10.12735/jfe.v7n1p1

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Shareholder Value and Industry Decline

Anne Anderson1  Mary E. Deily1 

1College of Business and Economics, Lehigh University, Bethlehem, PA, USA

URL: https://doi.org/10.12735/jfe.v7n1p1

To Cite this Article     Article Views: 255     Downloads: 239  Since deposited on 2018-01-20

Abstract

We examine, from the point of view of shareholders’ value, different strategies adopted by integrated steel firms in response to severe industry decline. We calculate the annual return generated from investing in integrated steel firms during the decline, assuming that all dividends paid out by a firm as well as any residual value left if the firm exited were invested in the S&P 500, and compare those cumulative annual growth rates to growth of an investment in the S&P over the same period. We find that firms that maintained or increased their investment in steel mostly generated lower returns, although conglomerate mergers in some cases cushioned the loss to shareholders. On average, corporations able to exit from steel entirely did best, particularly if they sold out earlier or if the steel assets were not the core business of the corporation.

JEL Classifications: G11, G33, G34, G39, L10

Keywords: Shareholder value, restructuring, diversification

To Cite this Article: Anderson, A., & Deily, M. E. (2018). Shareholder value and industry decline. Journal of Finance and Economics, 7(1), 1-19. https://doi.org/10.12735/jfe.v7n1p1

Copyright © A. Anderson & M. E. Deily

Creative Commons License
This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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Shareholder Value and Industry Decline
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