The role of the seller’s stock performance in the market reaction to divestiture announcements

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• 作者：Pascal Nguyen
• 关键词：Divestitures ; Value creation ; Firm performance ; Abnormal returns ; Restructuring ; G31 ; G32 ; G34
• 刊名：Journal of Economics and Finance
• 出版年：2016
• 出版时间：January 2016
• 年：2016
• 卷：40
• 期：1
• 页码：19-40
• 全文大小：314 KB
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• 作者单位：Pascal Nguyen (1)
  
  1. Neoma Business School, 1 Avenue du Maréchal Juin, 76825, Mont Saint-Aignan, France
  
• 刊物主题：Economics general; Financial Economics; Finance/Investment/Banking;
• 出版者：Springer US
• ISSN：1938-9744

文摘

Divestitures have the potential to create shareholder value. However, the extent of the market reaction should depend on the likelihood of finding more valuable uses for the divested assets or the ability on the part of the seller to eliminate negative synergies. We hypothesize that strong performers have less scope to achieve substantial improvements compared to poorly performing firms. Using the seller’s stock return in excess of the market return in the 1-year and 2-year periods preceding the divestiture announcement to expose the divesting firm’s inefficient use of its assets, we show that the market reaction to divestiture announcements is significantly higher for underperforming firms. The difference in abnormal returns can be as high as 4 %. In contrast, none of the accounting-based variables that have been used in previous studies are found to be significantly related to the announcement returns. These results suggest that the firm’s stock performance is a more useful indicator of the wealth effect associated with divestitures. Keywords Divestitures Value creation Firm performance Abnormal returns Restructuring