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| Author: | Clubb, C. Stouraitis, A. |
| Title: | The significance of sell-off profitability in explaining the market reaction to divestiture announcements |
| Journal: | Journal of Banking and Finance
2002 : APR, VOL. 26:4, p. 671-688 |
| Index terms: | PROFITABILITY MARKETS ANALYTICAL REVIEW FINANCE |
| Language: | eng |
| Abstract: | Previous research on asset sales has emphasized the divestment motivation and the use of the proceeds from the sale as determinants of selling firm value gains. In contrast, this paper explores the extent to which the relevant information necessary to evaluate sell-offs is embodied in the profitability of the sale, i.e. the price received by the seller over the value-in-use of the divested assets, where the latter is a function of past operating earnings and book value. The authors' empirical results show that sell-off profitability is substantially more significant in explaining the market reaction to divestiture announcements than the previous literature has suggested. |
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