CORPORATE FOCUS AND STOCK RETURNS

Greater corporate focus is consistent with shareholder wealth maximiza tion. Diseconomies of scope in the 1980s are confirmed by a trend towa rds focus or specialization, a positive relation between stock returns and focus increases, and the failure of diversified firms to exploit financial economies of scope (coinsurance of debt or reliance on inter nal capital markets). Large focused firms were less likely to be subje ct to hostile takeover attempts than were other firms, but diversified firms were distinguished in the 1980s mostly by being relatively acti ve participants, as both buyers and sellers, in the market for corpora te control.