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Write‐Down Timeliness, Line‐of‐Business Disclosures and Investors’ Interpretations of Segment Divestiture Announcements

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  • Denton Collins
  • Steven Henning

Abstract

This paper examines investors’ anticipation and subsequent interpretations of asset write‐downs accompanying segment divestitures. Examining long‐window returns cumulated over the two years preceding the year of divestiture, we hypothesize and find that investors anticipate write‐downs of segment operating assets before divestiture and recognition occurs, with anticipation conditional on the timeliness of the write‐down and prior disclosure of the segments’ operating results under segment reporting rules. Short‐window returns cumulated over the three days surrounding the announcement of the divestiture confirm that investor interpretations of asset write‐downs are similarly contingent on write‐down timeliness and prior disclosure.

Suggested Citation

  • Denton Collins & Steven Henning, 2004. "Write‐Down Timeliness, Line‐of‐Business Disclosures and Investors’ Interpretations of Segment Divestiture Announcements," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(9‐10), pages 1261-1299, November.
    • Handle: RePEc:bla:jbfnac:v:31:y:2004:i:9-10:p:1261-1299
    DOI: 10.1111/j.0306-686X.2004.00574.x
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