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Divestitures, Wealth Effects and Corporate Governance

27 Pages Posted: 4 Jun 2010  

Sian A. Owen

UNSW Australia Business School, School of Banking and Finance; Financial Research Network (FIRN)

Liting Shi

UNSW Australia Business School, School of Banking and Finance

Alfred Yawson

University of Adelaide Business School; Financial Research Network (FIRN)

Abstract

We analyse the market reaction to divestiture decisions and determine the impact of corporate governance practices. We find the market reaction is significant and can be determined using internal governance mechanisms. We evaluate the determinants of the decision to sell using a control sample of firms displaying characteristics often associated with divestitures indicating that these firms may face the same incentives to divest but elect not to restructure in this manner. Our results suggest that a combination of strong internal and external governance may force managers to act in a manner that is incompatible with their personal desires.

Suggested Citation

Owen, Sian A. and Shi, Liting and Yawson, Alfred, Divestitures, Wealth Effects and Corporate Governance. Accounting & Finance, Vol. 50, No. 2, pp. 389-415, June 2010. Available at SSRN: https://ssrn.com/abstract=1615756 or http://dx.doi.org/10.1111/j.1467-629X.2009.00332.x

Sian A. Owen

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Liting Shi

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

Alfred Yawson

University of Adelaide Business School ( email )

No 233 North Terrace
Adelaide, South Australia 5005
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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