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Comparing Acquisitions and Divestitures

Audra L. Boone

Texas Christian University - M.J. Neeley School of Business

J. Harold Mulherin

University of Georgia - Department of Banking and Finance

March 2000

We study the acquisition and divestiture activity of a sample of 1,305 firms from 59 industries during the 1990-99 period. Consistent with the importance of restructuring activity during the 1990s, we find that half of the sample firms are acquired or engage in a major divestiture. Consistent with the notion
that economic change is a source of the observed restructuring activity, we find significant industry clustering in both acquisitions and divestitures. We also study the announcement effects of the two forms of restructuring and find that both acquisitions and divestitures in the 1990s increase shareholder wealth. Moreover, the wealth effects for both acquisitions and divestitures are directly related to the relative size of the event. The symmetric, positive wealth effects for acquisitions and divestitures are consistent with a synergistic explanation for both forms of restructuring and are inconsistent with non-synergistic models based on entrenchment, empire building and hubris.

Number of Pages in PDF File: 39

JEL Classification: G14, G34

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Date posted: April 19, 2000  

Suggested Citation

Boone, Audra L. and Mulherin, J. Harold, Comparing Acquisitions and Divestitures (March 2000). Available at SSRN: https://ssrn.com/abstract=218145 or http://dx.doi.org/10.2139/ssrn.218145

Contact Information

Audra Boone
Texas Christian University - M.J. Neeley School of Business ( email )
Fort Worth, TX 76129
United States
J. Harold Mulherin (Contact Author)
University of Georgia - Department of Banking and Finance ( email )
Terry College of Business
Athens, GA 30602-6253
United States
706-542-3644 (Phone)
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