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Acquisition of Divested Assets and Shareholders' Wealth

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  • Sicherman, Neil W
  • Pettway, Richard H
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    Abstract

    The divesting of corporate assets has become quite popular. Previous studies of divestitures have found conflicting impacts upon shareholders' wealth of the buying firm. This study measures the impacts of product-line relatedn ess between the acquiring firm and the divested unit and the financia l weakness of the selling firm upon the abnormal returns to the acqui ring firm. Although the study finds that the impact of financial stre ngth of the seller is ambiguous, the purchase of related assets produ ces more wealth than does the purchase of unrelated divested units. F urther, firms which purchase related divested units have larger propo rtions of insider ownership. Copyright 1987 by American Finance Association.

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    Bibliographic Info

    Article provided by American Finance Association in its journal Journal of Finance.

    Volume (Year): 42 (1987)
    Issue (Month): 5 (December)
    Pages: 1261-73

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    Handle: RePEc:bla:jfinan:v:42:y:1987:i:5:p:1261-73

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    Cited by:
    1. Dennis C. Mueller & Mark L. Sirower, 2003. "The causes of mergers: tests based on the gains to acquiring firms' shareholders and the size of premia," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(5), pages 373-391.
    2. Blumberg, Aryeh & Owers, James E., 1996. "The convergence of foreign direct investment and restructuring: Evidence from cross-border divestitures," Global Finance Journal, Elsevier, vol. 7(1), pages 67-87.
    3. Datta, Sudip & E. Iskandar-Datta, Mai, 1995. "Corporate partial acquisitions, total firm valuation and the effect of financing method," Journal of Banking & Finance, Elsevier, vol. 19(1), pages 97-115, April.
    4. MacKinnon, Greg, 2002. "Asset sales and takeover threats," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(4), pages 765-777.
    5. Benou, Georgina & Madura, Jeff & Ngo, Thanh, 2008. "Wealth creation from high-tech divestitures," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(3), pages 505-519, August.
    6. Yan-leung Cheung & P. Raghavendra Rau & Aris Stouraitis, 2004. "Tunneling, Propping and Expropriation Evidence from Connected arty Transactions in Hong Kong," Working Papers 092004, Hong Kong Institute for Monetary Research.
    7. Jory, Surendranath R. & Madura, Jeff & Ngo, Thanh N., 2012. "Deal structure decision in the global market for divested assets," International Review of Financial Analysis, Elsevier, vol. 24(C), pages 104-116.
    8. Comment, Robert & Jarrell, Gregg A., 1995. "Corporate focus and stock returns," Journal of Financial Economics, Elsevier, vol. 37(1), pages 67-87, January.
    9. Kien Cao & Jeff Madura, 2011. "Determinants of the Method of Payment in Asset Sell‐Off Transactions," The Financial Review, Eastern Finance Association, vol. 46(4), pages 643-670, November.
    10. R. Glenn Hubbard & Darius Palia, 1998. "A Re-Examination of the Conglomerate Merger Wave in the 1960s: An Internal Capital Markets View," NBER Working Papers 6539, National Bureau of Economic Research, Inc.
    11. Donald G. Christensen & Donald R. Levi, 1993. "Why Do Real Estate Master Limited Partnerships Seem to be Undervalued?," Journal of Real Estate Research, American Real Estate Society, vol. 8(1), pages 1-12.
    12. Danny Yeung, 2012. "The Impact of Institutional Ownership: A Study of the Australian Equity Market," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 11.

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