Acquiring Divestors

50 Pages Posted: 2 Apr 2019 Last revised: 11 Sep 2019

See all articles by Giang Nguyen

Giang Nguyen

Waseda University - Faculty of Political Science and Economics

Viet Hung Pham

La Trobe University - La Trobe Business School - Department of Economics and Finance

Date Written: March 11, 2019

Abstract

This paper examines the relationship between targets’ asset divestitures and takeover premiums. We find that divesting targets (divestors) receive lower offered premiums, experience less positive announcement returns, and have a trade discount relative to non-divesting targets. We show that the efficiency of divestitures explains the effects. Specifically, they are more pronounced when targets divest assets more efficiently, operate in non-competitive industries, or announce divestitures before Sarbanes Oxley Act. We further document that the neo-agency view “eat or be eaten” is only partially supported. Asset divestitures have no significant effects on transaction synergies and acquirer announcement returns. Overall, our findings support the view that asset divestitures increase target efficiency that deter the interest of potential bidders.

Keywords: Acquisition; Divestiture; Premium; Announcement Return; Efficiency

JEL Classification: G34

Suggested Citation

Nguyen, Giang and Pham, Viet Hung, Acquiring Divestors (March 11, 2019). Available at SSRN: https://ssrn.com/abstract=3349546 or http://dx.doi.org/10.2139/ssrn.3349546

Giang Nguyen (Contact Author)

Waseda University - Faculty of Political Science and Economics ( email )

1-6-1 Nishiwaseda
Shinjuku
Japan

Viet Hung Pham

La Trobe University - La Trobe Business School - Department of Economics and Finance ( email )

Bundoora
Melbourne, 3086
Australia

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