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

摘要

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.