Valuation effects of foreign divestitures

The Effect of Foreign Divestment on Subsequent Firm Performance: The Moderating Role of Spatial and Temporal Dispersion of Prior Divestment Experience

“…Our first finding shows that foreign divestment can be detrimental to the financial performance of firms. Extant empirical research examining this effect is heavily dominated by studies in corporate finance literature, where the focus is mostly on divestment and shareholder/stock price reaction (Tsetsekos and Gombola, 1992; Borde, Madura and Akhigbe, 1998; Brauer and Wiersema, 2012; Depecik, van Everdingen and van Bruggen, 2014). This view of divestment and performance is largely skewed, as it focuses on the public, short‐term reaction of markets rather than on the long‐term performance of the firm.…”

“…Some studies have drawn on corporate restructuring logic to argue that divestments improve firm performance (Bergh, 1998). Borde, Madura and Akhigbe (1998), for instance, examined the valuation effects of foreign divestment announcements and found positive effects that they attributed to a positive market reaction to firms' reallocation of resources towards better uses. A recent meta-analysis also sug-gests a positive link between divestment and firm performance.…”

“…Also, unlike other sectors, where the stock market reactions are of significant importance, retailers' performance is predominantly judged by their financial performance, that is, their ability to deliver high return on assets and return on sales ratios (Batsakis and Theoharakis, 2021;Nath et al, 2019). Therefore, while restructuring through divestment activity can potentially be judged a good signal in the public markets for firms that have overdiversified internationally (Bergh, 1998;Borde, Madura and Akhigbe, 1998), for retailers who are in general characterised by low levels of international integration, this can be deemed a sign of weakness, which has a negative effect on their financial performance. Below, we append our arguments in favour of a negative effect of foreign divestment on retailer financial performance.…”

Determinants of the Method of Payment in Asset Sell‐Off Transactions

“…1 1 For example, Jain (1985), Sicherman and Pettway (1987, 1992), Hite, Owers, and Rogers (1987), John and Ofek (1995), and Datta, Datta, and Raman (2003) suggest that asset selloffs are positive net present value transactions. Studies by Afshar, Taffler, and Sudarsanam (1992), Tsetsekos and Gombola (1992), Borde, Madura, and Akhigbe (1998), Gleason, Mathur, and Singh (2000), Clubb and Stouraitis (2002), and Slovin, Sushka, and Polonchek (2005) find significant positive wealth effects for both bidders and sellers in domestic as well as international asset sell‐off transactions. …”

Does Corporate Control Transactions’ Type and Focus really Create Value? Evidence from an Emerging Market

“…They find that the improvement in performance occurs primarily in firms that increase their focus. Borde, Madura, and Akhigbe (1999) find that evaluation effects are more favorable when foreign divestiture are for strategic reorganization purpose. Another reason is to eliminate a low-performing division or business.…”