The Impact of the Announcement of Acquisition of Divested Assets on Buyers’ Wealth - Asset Fit and Disclosure of Funds Used: Evidence from the U.K.

22 Pages Posted: 12 Jun 2004 Last revised: 10 Jun 2013

See all articles by Balasingham Balachandran

Balasingham Balachandran

La Trobe University - School of Economics and Finance; Financial Research Network (FIRN)

Robert W. Faff

University of Queensland

Roger William Love

Monash University - Department of Accounting

Andrew Menon

Monash Business School

Multiple version iconThere are 2 versions of this paper

Date Written: 2008

Abstract

This study examines the effects of announcements of acquisition of assets on shareholder wealth of buyers over the period January 2000 to December 2002 in the U.K. Significant positivem announcement period abnormal returns for ‘fit’ acquisitions of divested assets that disclosed the “sources of funds” are documented. Multivariate regression analysis shows that announcement period abnormal returns are significantly related to pre-announcement period abnormal returns, relative size of the acquisitions and disclosure of sources of funds. Overall, there is little or no support for the asset fit hypothesis. However, there is strong support for “Fund Source Disclosure”, “Fund Source Pecking-Order” and “Relative Size of Acquisition” Hypotheses.

Keywords: divested asset acquisition, buyers, price reaction, fit and non-fit, fund source

JEL Classification: G34

Suggested Citation

Balachandran, Balasingham and Faff, Robert W. and Love, Roger William and Menon, Andrew, The Impact of the Announcement of Acquisition of Divested Assets on Buyers’ Wealth - Asset Fit and Disclosure of Funds Used: Evidence from the U.K. (2008). EFMA 2004 Basel Meetings Paper and Multinational Finance Journal, 2008, vol. 12, no. 3/4, pp. 219–240. Available at SSRN: https://ssrn.com/abstract=499463 or http://dx.doi.org/10.2139/ssrn.499463

Balasingham Balachandran

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

La Trobe University
Bundoora, Vic, 3086
Australia

Financial Research Network (FIRN)

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

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

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Roger William Love (Contact Author)

Monash University - Department of Accounting ( email )

Building 11E
Clayton, Victoria 3800
Australia

Andrew Menon

Monash Business School ( email )

Wellington Road
Clayton, Victoria 3168
Australia

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