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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

Author

Listed:
  • Balasingham Balachandran

    (Monash University, Australia)

  • Robert Faff

    (Monash University, Australia)

  • Roger Love

    (Monash University, Australia)

  • Andrew Menon

    (Monash University, Australia)

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 positive 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 .

Suggested Citation

  • Balasingham Balachandran & Robert Faff & Roger Love & Andrew Menon, 2008. "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," Multinational Finance Journal, Multinational Finance Journal, vol. 12(3-4), pages 219-240, September.
    • Handle: RePEc:mfj:journl:v:12:y:2008:i:3-4:p:219-240
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    divested asset acquisition; buyers; price reaction; fit and non-fit; fund source;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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