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Write‐Down Timeliness, Line‐of‐Business Disclosures and Investors’ Interpretations of Segment Divestiture Announcements
Author(s) -
Collins Denton,
Henning Steven
Publication year - 2004
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.0306-686x.2004.00574.x
Subject(s) - divestment , anticipation (artificial intelligence) , asset (computer security) , business , economics , monetary economics , accounting , finance , computer science , computer security , artificial intelligence
This paper examines investors’ anticipation and subsequent interpretations of asset write‐downs accompanying segment divestitures. Examining long‐window returns cumulated over the two years preceding the year of divestiture, we hypothesize and find that investors anticipate write‐downs of segment operating assets before divestiture and recognition occurs, with anticipation conditional on the timeliness of the write‐down and prior disclosure of the segments’ operating results under segment reporting rules. Short‐window returns cumulated over the three days surrounding the announcement of the divestiture confirm that investor interpretations of asset write‐downs are similarly contingent on write‐down timeliness and prior disclosure.