Divestitures, wealth effects and corporate governance
Source: Accounting and Finance, Volume 50, Number 2, June 2010 , pp. 389-415(27)
We analyse the market reaction to divestiture decisions and determine the impact of corporate governance practices. We find the market reaction is significant and can be determined using internal governance mechanisms. We evaluate the determinants of the decision to sell using a control sample of firms displaying characteristics often associated with divestitures indicating that these firms may face the same incentives to divest but elect not to restructure in this manner. Our results suggest that a combination of strong internal and external governance may force managers to act in a manner that is incompatible with their personal desires.
Document Type: Research Article
Publication date: June 1, 2010