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Voluntary Corporate Divestitures as Antitakeover Mechanisms

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  • Loh, Charmen
  • Bezjak, Jennifer Russell
  • Toms, Harrison

Abstract

This paper examines the investor reaction to the use of corporate selloffs as antitakeover devices. The results show that firms subject to takeover speculations prior to the divestiture announcement experience insignificant changes in share prices while firms that have no takeover bid report significant wealth increases. The majority of the firms that undergo defensive divestitures remain independent one year after the selloffs. These findings are consistent with the authors' proposition that investors regard divestitures following rumors of takeover attempt as antitakeover strategies. On the other hand, investors perceive selloffs in a takeover-free environment as a positive net present value decision. Copyright 1995 by MIT Press.

Suggested Citation

  • Loh, Charmen & Bezjak, Jennifer Russell & Toms, Harrison, 1995. "Voluntary Corporate Divestitures as Antitakeover Mechanisms," The Financial Review, Eastern Finance Association, vol. 30(1), pages 41-60, February.
    • Handle: RePEc:bla:finrev:v:30:y:1995:i:1:p:41-60
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    Cited by:

    1. Miriam Flickinger & Miriam Zschoche, 2018. "Corporate divestiture and performance: an institutional view," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 22(1), pages 111-131, March.

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