Stock Market Reaction to Sell-Offs Announcements: Canadian Evidence
14 Pages Posted: 19 Oct 2009 Last revised: 19 Jan 2010
Date Written: October 16, 2009
Abstract
This study examines the effects of Canadian divestitures announcements on selling companies’ shareholder wealth. Using a non parametric bootstrap approach to test for significance, our results show that the sell-off announcement produces significant positive average abnormal returns of 0.92% over a two day announcement period. Gains arise predominantly from divestitures that focus firm’s activities. A cross sectional regression shows that private lender monitoring and focused operations have a positive and significant wealth effect on the divesting firms.
Keywords: sell-offs, wealth effect, focus, lender monitoring, financial distress
JEL Classification: G14, G34
Suggested Citation: Suggested Citation
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