IDEAS home Printed from https://ideas.repec.org/a/ibf/ijbfre/v6y2012i2p59-67.html
   My bibliography  Save this article

Impact Of Divestiture Activities On Corporate Performance: Evidence From Listed Firms In Taiwan

Author

Listed:
  • Meijui Sun

Abstract

This study examines how divesture affects the performance of listed companies in Taiwan. Divestiture describes firms selling their assets, production lines, subsidiaries or other segments for either cash or securities. This study focuses on two types of divestiture activities: sell-offs and equity carve-outs. Specifically, this work employs a control group design to examine 266 sell-off and equity carve-out announcements between 1995 and 2004, and measures the short-term abnormal stock returns and long-term (5 years) operating performance using financial ratios. The analytical results show significant positive stock abnormal returns associated with divestiture announcements for listed companies in Taiwan. Furthermore, firms generally experienced enhanced performance after undertaking divestiture activities.

Suggested Citation

  • Meijui Sun, 2012. "Impact Of Divestiture Activities On Corporate Performance: Evidence From Listed Firms In Taiwan," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 6(2), pages 59-67.
    • Handle: RePEc:ibf:ijbfre:v:6:y:2012:i:2:p:59-67
    as

    Download full text from publisher

    File URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v6n2-2012/IJBFR-V6N2-2012-5.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Clubb, Colin & Stouraitis, Aris, 2002. "The significance of sell-off profitability in explaining the market reaction to divestiture announcements," Journal of Banking & Finance, Elsevier, vol. 26(4), pages 671-688, April.
    2. Lang, Larry & Poulsen, Annette & Stulz, Rene, 1995. "Asset sales, firm performance, and the agency costs of managerial discretion," Journal of Financial Economics, Elsevier, vol. 37(1), pages 3-37, January.
    3. Veld, Chris & Veld-Merkoulova, Yulia V., 2004. "Do spin-offs really create value? The European case," Journal of Banking & Finance, Elsevier, vol. 28(5), pages 1111-1135, May.
    4. Michelle Haynes & Steve Thompson & Mike Wright, 2002. "The Impact of Divestment on Firm Performance: Empirical Evidence from a Panel of UK Companies," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 173-196, June.
    5. Raghuram Rajan & Henri Servaes & Luigi Zingales, 2000. "The Cost of Diversity: The Diversification Discount and Inefficient Investment," Journal of Finance, American Finance Association, vol. 55(1), pages 35-80, February.
    6. Hiraki, Takato & Inoue, Hideaki & Ito, Akitoshi & Kuroki, Fumiaki & Masuda, Hiroyuki, 2003. "Corporate governance and firm value in Japan: Evidence from 1985 to 1998," Pacific-Basin Finance Journal, Elsevier, vol. 11(3), pages 239-265, July.
    7. Mulherin, J. Harold & Boone, Audra L., 2000. "Comparing acquisitions and divestitures," Journal of Corporate Finance, Elsevier, vol. 6(2), pages 117-139, July.
    8. Kaiser, Kevin & Stouraitis, Aris, 1995. "Value creation through corporate restructuring: European divestitures," European Management Journal, Elsevier, vol. 13(2), pages 164-174, June.
    9. Rosenfeld, James D, 1984. "Additional Evidence on the Relation between Divestiture Announcements and Shareholder Wealth," Journal of Finance, American Finance Association, vol. 39(5), pages 1437-1448, December.
    10. Robert Hanson & Moon Song, 2003. "Long-term performance of divesting firms and the effect of managerial ownership," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 27(3), pages 321-336, September.
    11. Jain, Prem C, 1985. "The Effect of Voluntary Sell-off Announcements on Shareholder Wealth," Journal of Finance, American Finance Association, vol. 40(1), pages 209-224, March.
    12. John, Kose & Ofek, Eli, 1995. "Asset sales and increase in focus," Journal of Financial Economics, Elsevier, vol. 37(1), pages 105-126, January.
    13. Haynes, Michelle & Thompson, Steve & Wright, Mike, 2002. "The Impact of Divestment on Firm Performance: Empirical Evidence from a Panel of UK Companies," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 173-196, June.
    14. Myeong-Hyeon Cho & Mark A. Cohen, 1997. "The economic causes and consequences of corporate divestiture," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(5), pages 367-374.
    15. Chen, Carl R. & Guo, Weiyu & Mande, Vivek, 2003. "Managerial ownership and firm valuation: Evidence from Japanese firms," Pacific-Basin Finance Journal, Elsevier, vol. 11(3), pages 267-283, July.
    16. Heather Hulburt & James Miles & J Randall Woolridge, 2002. "Value Creation from Equity Carve-Outs," Financial Management, Financial Management Association, vol. 31(1), Spring.
    17. Kim, Kenneth A. & Kitsabunnarat, Pattanaporn & Nofsinger, John R., 2004. "Ownership and operating performance in an emerging market: evidence from Thai IPO firms," Journal of Corporate Finance, Elsevier, vol. 10(3), pages 355-381, June.
    18. Hite, Gailen L. & Owers, James E. & Rogers, Ronald C., 1987. "The market for interfirm asset sales : Partial sell-offs and total liquidations," Journal of Financial Economics, Elsevier, vol. 18(2), pages 229-252, June.
    19. Amy Dittmar & Anil Shivdasani, 2003. "Divestitures and Divisional Investment Policies," Journal of Finance, American Finance Association, vol. 58(6), pages 2711-2744, December.
    20. Datta, Sudip & Iskandar-Datta, Mai & Raman, Kartik, 2003. "Value creation in corporate asset sales: The role of managerial performance and lender monitoring," Journal of Banking & Finance, Elsevier, vol. 27(2), pages 351-375, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Forcadell, Francisco Javier & Sanchez-Riofrio, Angelica & Guerras-Martín, Luis Ángel & Romero-Jordán, Desiderio, 2020. "Is the restructuring-performance relationship moderated by the economic cycle and the institutional environment for corporate governance?," Journal of Business Research, Elsevier, vol. 110(C), pages 397-407.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Angélica María Sánchez-Riofrío & Luis Ángel Guerras-Martín & Francisco Javier Forcadell, 2015. "Business portfolio restructuring: a comprehensive bibliometric review," Scientometrics, Springer;Akadémiai Kiadó, vol. 102(3), pages 1921-1950, March.
    2. 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.
    3. Humphery-Jenner, Mark & Powell, Ronan & Zhang, Emma Jincheng, 2019. "Practice makes progress: Evidence from divestitures," Journal of Banking & Finance, Elsevier, vol. 105(C), pages 1-19.
    4. Vinay Patel, 2015. "Price Discovery in US and Australian Stock and Options Markets," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 27, July-Dece.
    5. Vinay Patel, 2015. "Price Discovery in US and Australian Stock and Options Markets," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 6-2015.
    6. Prezas, Alexandros P. & Simonyan, Karen, 2015. "Corporate divestitures: Spin-offs vs. sell-offs," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 83-107.
    7. Erl, Ludwig & Kiesel, Florian & Koenigsmarck, Markus & Schiereck, Dirk, 2023. "Performance effects of sell-offs and the role of sell-off experience," The Quarterly Review of Economics and Finance, Elsevier, vol. 88(C), pages 244-257.
    8. Balasingham Balachandran & Robert Faff & Roger Love & Andrew Menon, 2008. "The Impact of the Announcement of Acquisition of Divested Assets on Buyers’ Wealth - Asset Fit and Disclosure of Funds Used: Evidence from the U.K," Multinational Finance Journal, Multinational Finance Journal, vol. 12(3-4), pages 219-240, September.
    9. Vitkova, Valeriya & Tian, Siyang & Sudarsanam, Sudi, 2023. "Allocative efficiency of internal capital markets: Evidence from equity carve-outs by diversified firms," International Review of Financial Analysis, Elsevier, vol. 86(C).
    10. Miriam Flickinger & Miriam Zschoche, 2018. "Corporate divestiture and performance: an institutional view," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 22(1), pages 111-131, March.
    11. Clubb, Colin & Stouraitis, Aris, 2002. "The significance of sell-off profitability in explaining the market reaction to divestiture announcements," Journal of Banking & Finance, Elsevier, vol. 26(4), pages 671-688, April.
    12. Alex Edmans & William Mann, 2019. "Financing Through Asset Sales," Management Science, INFORMS, vol. 65(7), pages 3043-3060, July.
    13. Manuel Portugal Ferreira & Nuno R. Reis & Roberta M. Paula & Claudia Frias Pinto, 2017. "Structural and longitudinal analysis of the knowledge base on spin-off research," Scientometrics, Springer;Akadémiai Kiadó, vol. 112(1), pages 289-313, July.
    14. Chiung‐Jung Chen & Chwo‐Ming Joseph Yu, 2023. "Do sell‐off market returns benefit all shareholders?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1504-1520, April.
    15. 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.
    16. Ruoran Xu & Yuen Leng Chow & Joseph T.L. Ooi, 2017. "A Relook into the Impact of Divestitures in the Presence of Agency Conflicts: Evidence from Property Subsidiary Sell-Offs in China," The Journal of Real Estate Finance and Economics, Springer, vol. 55(3), pages 313-344, October.
    17. Hanson, Robert C. & Song, Moon H., 2000. "Managerial ownership, board structure, and the division of gains in divestitures," Journal of Corporate Finance, Elsevier, vol. 6(1), pages 55-70, March.
    18. Huang, Sheng, 2014. "Managerial expertise, corporate decisions and firm value: Evidence from corporate refocusing," Journal of Financial Intermediation, Elsevier, vol. 23(3), pages 348-375.
    19. Panos Desyllas, 2009. "Improving performance through vertical disintegration: evidence from UK manufacturing firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 307-324.
    20. Nguyen, Giang & Nguyen, Hai, 2019. "Does seller status matter in inter-corporate asset sales?," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 97-110.

    More about this item

    Keywords

    Divestiture; Sell-offs; Equity carve-outs; Event study; Taiwan;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibf:ijbfre:v:6:y:2012:i:2:p:59-67. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mercedes Jalbert (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.