The aim of this study is to examine the short- and long-run shareholder wealth effects
following corporate sell-offs. In particular, a sample of 105 corporate sell-offs that took
place in the US between 2010 and 2015 is collected to test the stock market reaction of
the initial sell-off announcement. Employing the classical event study methodology,
significant positive price movements are observed for the parent firms on, and around
the announcement date. The results are consistent with previous studies indicating that
shareholders generate wealth gains in the short horizon. On the other hand,
insignificant negative price movements are detected for up to two years following the
initial sell-off announcement. However, the positive return performance from 6 months
to 12 months after the announcement implies that shareholders benefit if firms manage
to allocate efficiently the proceeds from the deal. Furthermore, despite the fact that
changes in the operating performance of sellers are not significant, the results provide
evidence that sell-offs improve their post operating performance.
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