Evaluating the market reaction to UK divestitures
Date
2006
Authors
Cao, J.
Owen, S.
Yawson, A.
Editors
Advisors
Journal Title
Journal ISSN
Volume Title
Type:
Journal article
Citation
Management Research Review: Communication of emergent international management research, 2006; 29(8):471-479
Statement of Responsibility
Jack Cao, Sian Owen and Alfred Yawson
Conference Name
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.
School/Discipline
Dissertation Note
Provenance
Description
Access Status
Rights
© 2006 Emerald Group Publishing Limited