Valuation effects of foreign divestitures

Stephen F. Borde, Jeff Madura and Aigbe Akhigbe
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Stephen F. Borde: University of Central Florida, Orlando, FL 32816-1400, USA, Postal: University of Central Florida, Orlando, FL 32816-1400, USA
Jeff Madura: Florida Atlantic University, Boca Raton, FL 33431-0991, USA, Postal: Florida Atlantic University, Boca Raton, FL 33431-0991, USA
Aigbe Akhigbe: Florida Atlantic University, Boca Raton, FL 33431-0991, USA, Postal: Florida Atlantic University, Boca Raton, FL 33431-0991, USA

Managerial and Decision Economics, 1998, vol. 19, issue 2, 71-79

Abstract: This study assesses announcement period valuation effects of foreign divestitures and explains why these valuation effects vary among firms. Significant positive valuation effects are observed. The valuation effects of foreign divestitures are positive and are similar in magnitude to those of a matched control group of domestic divestitures. Results of a cross-sectional analysis suggest that valuation effects are positively related to the relative size of the divested unit. Valuation effects are more favorable when divestitures are for strategic reorganization purposes and|or to raise cash, and valuation effects are more favorable for foreign divestitures in industrialized host countries. Several important managerial implications emerge from the results of this study. © 1998 John Wiley & Sons, Ltd.

Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:19:y:1998:i:2:p:71-79

DOI: 10.1002/(SICI)1099-1468(199803)19:2<71::AID-MDE866>3.0.CO;2-#

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