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Why do managers announce the intention to sell large assets?

Author

Listed:
  • Abe de Jong
  • Pouyan Ghazizadeh
  • Frederik P. Schlingemann
  • Farhan Shazia

Abstract

Nearly one‐third of asset sale announcements are preceded by a public statement of the intent to sell. These voluntary disclosures generate significant average returns of 1.1%. Pre‐announcements bias returns around the actual asset sales toward zero. Due to opportunistic managerial behavior, pre‐announcements occur after poor stock performance and CEO turnover. Managers also opportunistically exercise options around the pre‐announcements and receive potential benefits from the uptick in stock prices. Although we find no effect of pre‐announcements on long‐term operational performance, we do observe a negative effect on stock returns using three and four‐factor models.

Suggested Citation

  • Abe de Jong & Pouyan Ghazizadeh & Frederik P. Schlingemann & Farhan Shazia, 2024. "Why do managers announce the intention to sell large assets?," International Review of Finance, International Review of Finance Ltd., vol. 24(4), pages 641-668, December.
    • Handle: RePEc:bla:irvfin:v:24:y:2024:i:4:p:641-668
    DOI: 10.1111/irfi.12461
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    References listed on IDEAS

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