Value creation through corporate restructuring: European divestitures

Kevin Kaiser and Aris Stouraitis present preliminary evidence on stock market reaction to divestiture announcements by European firms. Included in their sample are divestitures by French, German, Swedish and UK firms. Their findings include: (1) stock price reaction during initial announcements of domestic subsidiary sell-offs is positive and consistent (in size and direction) with the US evidence, (2) in contrast to evidence for sellers in the US, the European evidence indicates that seller performance improves substantially for the 60 trading days following the event, (3) there appear to be substantial information leakages in Continental European countries many trading days prior to the initial announcement of the event to the Press, (4) there appear to be differences across countries in the way cumulative abnormal returns are distributed between sellers divesting domestic subsidiaries (positive effect) and sellers divesting foreign subsidiaries (ambiguous effect), and (5) the relative size of the divested unit explains a considerable portion of the variation in stock-price effects across firms.