Wealth effects for acquirers and divestors related to foreign divested assets

Kimberly C. Gleason, Ike Mathur, Manohar Singh

Research output: Contribution to journalArticle

24 Scopus citations

Abstract

This study examines acquisitions of foreign divested assets by U.S. firms. The results indicate that the excess returns to these acquisitions is a significant 0.48%, suggesting that capital markets perceive potential synergies from the effective utilization and strategic management of these assets by U.S. companies. The wealth effects to divestors of these foreign assets is 0.65%, significant at the 1% level, indicating that firms benefit from reducing their geographic scope of operations. We further examine excess returns to acquirers, and we find that several firm-specific characteristics foster anticipation of positive performance gains resulting from the acquisition of divested assets in foreign countries. Similar results are observed for the divesting firms also. Analysis of long horizon performance provides weak indication that performance of divesting firms improves subsequent to the divestment.

Original languageEnglish (US)
Pages (from-to)5-20
Number of pages16
JournalInternational Review of Financial Analysis
Volume9
Issue number1
DOIs
StatePublished - Feb 2000

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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