A Relook into the Impact of Divestitures in the Presence of Agency Conflicts: Evidence from Property Subsidiary Sell-Offs in China

Ruoran Xu (), YuenLeng Chow and Joseph Ooi ()
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Ruoran Xu: Southwestern University of Finance and Economics

The Journal of Real Estate Finance and Economics, 2017, vol. 55, issue 3, No 3, 313-344

Abstract: Abstract We analyze property subsidiary sell-offs in China to examine her market reaction to firms’ divestiture decisions. Overall, the response from the stock market is neutral. However, detailed analysis reveals that the market reacts differently to property subsidiary sell-off announcements by state-owned enterprises (SOEs) and non-SOEs. Consistent with findings from extant literature, we find statistically positive market returns associated with non-SOE sell-off announcements. However, we find statistically negative market returns associated with SOE sell-off announcements. We suggest that this divergent market reaction is influenced by the institutional feature of the Chinese market and is consistent with the high agency costs associated with state ownership.

Keywords: Divestiture; Property sell-offs; SOEs; Agency costs; China (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s11146-016-9584-x

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