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The short-run wealth effects of foreign divestitures by UK firms

Coakley, J and Thomas, H and Wang, HM (2008) 'The short-run wealth effects of foreign divestitures by UK firms.' Applied Financial Economics, 18 (3). 173 - 184. ISSN 0960-3107

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Abstract

We analyse a unique sample of 165 foreign divestitures by UK firms 1986-1995. These divestitures lead to significantly positive shareholder wealth effects of 4.8% over the 10 days before and after the announcement date. They are several times larger than the corresponding wealth effects reported for US firms and are robust to a number of factors such as size, market-to-book ratio, GARCH effects, thin trading effects and cross-sectional dependence. The wealth gains are associated with an increase in geographical focus towards Anglo-Saxon corporate governance regimes rather than simply in industrial focus as in the case of domestic divestitures. They are also related to poor pre-divestiture stock performance which is consistent with the financing explanation to combat agency and financial distress problems.

Item Type: Article
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Jim Jamieson
Date Deposited: 18 Dec 2012 11:32
Last Modified: 02 Mar 2018 16:15
URI: http://repository.essex.ac.uk/id/eprint/4772

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