The timing and substance of divestiture announcements: individual, simultaneous and cumulative effects

Article Abstract:

An analysis of corporate sell-offs indicates that the timing of the divestiture's being made public affects many economic aspects of the sale and purchase; these timing effects are referred to as announcement day effects. The announcement day effect is almost always good for the selling company's stock price initially; however, it is also shown that this positive effect is most present when the announcement of the divestiture includes price data. The size of the sell-off and the amount of positive impact the sale has on the company's stock prices are also positively related. In a discussion of the research on announcement day effects, it is pointed out that since the sample data examined are all taken from the Wall Street Journal, the research has an editorial bias built in to it.

Conferences, meetings and seminars, Corporate reorganizations, American Finance Association

---

Management buyouts of divisions and shareholder wealth

Article Abstract:

This paper examines the wealth effects to parent company shareholders around the announcement of divisional management buyouts. Despite the relative absence of "arm's-length" bargaining between buyer and seller, there is no evidence that divisional management buyouts result in reductions in parent company share prices. Instead, small but statistically significant wealth gains are found during the two-day period surrounding the buyout announcement. This evidence suggests that divisional buyouts reallocate ownership of corporate assets to higher valued uses and that the parent company stockholders share in the expected benefits of this change in ownership structure. (Reprinted by permission of the publisher.)

Management buyouts, Financial research

---

Additional evidence on the relation between divestiture announcements and shareholder wealth

Article Abstract:

Further evidence regarding the impact of voluntary divestiture announcements on shareholder wealth is provided. Both spin-off and sell-off announcements are found to have a significantly positive influence on share prices; spin-offs outperform the sell-offs over the announcement period. Results of tests comparing the adjusted returns of the selling firms to those of the acquiring firms show that the economic gains to both groups of shareholders are virtually identical. This suggests that the sell-off decision is perceived by both investor groups as a positive net present value (NPV) transaction.

Similar abstracts:

• Abstracts: The information content of discount rate announcements: what is behind the announcement effect? Economic news and equity market linkages between the U.S. and the U.K
• Abstracts: The USM so far: come on in, the water's fine. Earn-outs: motivation and conflict. Improving summary financial statements
• Abstracts: Earnings announcements, stock price adjustment, and the existence of option markets. Turn-of-month evaluations of liquid profits and stock returns: a common explanation for the monthly and January effects
• Abstracts: The academic base of the profession: an Edinburgh case study. Corporate financial reporting at the crossroads
• Abstracts: LYON taming. Seasonalities in NYSE bid-ask spreads and stock returns in January. Time-dependent variance and the pricing of bond options

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.