Open AccessDivestitures and shareholder wealth in the long-run – the South African case
Author(s) -
Emily S. Nichols,
Andrew A. Rosenberg,
Akios Majoni,
Samson Mukanjari
Publication year - 2014
Publication title -
corporate ownership and control
Language(s) - English
Resource type - Journals
eISSN - 1810-0368
pISSN - 1727-9232
DOI - 10.22495/cocv11i4c7p1
Subject(s) - divestment , shareholder , shareholder value , spin offs , monetary economics , sample (material) , stock (firearms) , business , stock exchange , economics , corporate governance , finance , industrial organization , geography , chemistry , archaeology , chromatography
This study examines the impact of divestitures (spin offs and sell offs) on shareholder wealth for the parent firms listed on the Johannesburg Stock Exchange over the period 1995-2011. The study also makes a comparison of the wealth created by spin offs versus sells offs. We found significantly negative cumulative abnormal returns over the 250 and 500 days respectively, post-announcement date. This result persisted for the whole sample and for the two subsamples of spin offs and sell offs even after running the test excluding the data during and after the financial crisis of 2008. The results suggest that, in general, divestitures in South Africa destroy shareholder value in the long run and sell offs are a better choice of divestitures compared to spin offsю