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Type: Journal article
Title: Evaluating the market reaction to UK divestitures
Author: Cao, J.
Owen, S.
Yawson, A.
Citation: Management Research Review, 2006; 29(8):471-479
Publisher: Emerald Group Publishing Ltd.
Issue Date: 2006
ISSN: 0140-9174
Statement of
Jack Cao, Sian Owen and Alfred Yawson
Abstract: Purpose – To determine whether the abnormal returns accruing to UK companies undertaking a divestiture are different when the unit sold is in the UK or elsewhere and to specifically hypothesize that returns generated by a domestic sale will be higher than those resulting from an overseas sale. Design/methodology/approach – Using a sample of 668 divestitures reported on securities data corporation (SDC) Platinum database, and share price data from DataStream, both abnormal returns and cumulative abnormal returns (CARs) are calculated around the announcement date using the market model. Findings – That the announcement of a divestiture generates positive abnormal returns for shareholders. Further, that the announcement of a UK divestiture generates a significantly larger positive market reaction than the announcement of an overseas divestiture. For the divestiture of units located outside the UK it is found that the largest CARs are generated when the buying firm is based in the UK. Originality/value – Here the existing work on divestiture announcement effects is extended by taking into account the location of the divested unit and the location of the buying firm. This allows one to investigate whether market reaction to an announcement of a divestiture is influenced by both the location of the unit sold and the location of the buying company.
Keywords: Acquisitions and mergers; Divestment; Multinational companies; Rate of return; Share values
Rights: © 2006 Emerald Group Publishing Limited
RMID: 0020110138
DOI: 10.1108/01409170610692798
Appears in Collections:Business School publications

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