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Australian Divestiture Activity: An Examination of Gains to Sell-Off Announcements

Author

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  • Mary Rose Cooney

    (UQ Business School, The University of Queensland, St Lucia, Queensland, Australia, 4072.)

  • Frank Finn

    (UQ Business School, The University of Queensland, St Lucia, Queensland, Australia, 4072.)

  • Angela Karl

    (UQ Business School, The University of Queensland, St Lucia, Queensland, Australia, 4072.)

Abstract

This study examines the source of gains associated with Australian divestiture activity, defined as a voluntary modification of the firm's productive assets by a sell-off of a complete operating division or wholly-owned subsidiary of the divesting firm The sell-off announcement produces positive average abnormal returns of 1.15% over the two-day announcement period. We conclude that the gains arise predominantly from divestitures that have a strategic focus as demonstrated by, first, the divested unit is unrelated to the firm's core activities (a strategic divestiture), second, the significance of the strategic variable in explaining the positive market reaction in regression analysis, and third, the finding of more significant results where the intended use of proceeds of the sell-off is for strategic purposes.

Suggested Citation

  • Mary Rose Cooney & Frank Finn & Angela Karl, 2004. "Australian Divestiture Activity: An Examination of Gains to Sell-Off Announcements," Australian Journal of Management, Australian School of Business, vol. 29(1_suppl), pages 135-151, June.
    • Handle: RePEc:sae:ausman:v:29:y:2004:i:1_suppl:p:135-151
    DOI: 10.1177/031289620402901S06
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    References listed on IDEAS

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    Cited by:

    1. Daniel Chai & Ziyang Lin & Chris Veld, 2018. "Value-creation through spin-offs: Australian evidence," Australian Journal of Management, Australian School of Business, vol. 43(3), pages 353-372, August.

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