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

Mary Rose Cooney, Frank Finn and Angela Karl
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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.

Australian Journal of Management, 2004, vol. 29, issue 1_suppl, 135-151

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.

Keywords: DIVESTITURES; STRATEGIC GAINS; SELL-OFFS (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:29:y:2004:i:1_suppl:p:135-151

DOI: 10.1177/031289620402901S06

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