University of Sussex
Browse

File(s) not publicly available

The wealth effects of acquiring foreign divested assets

journal contribution
posted on 2023-06-08, 19:59 authored by Surendranath R Jory, Thanh N Ngo
We compare the wealth effects of acquiring assets from a divesting firm (i.e., acquisitions of divested assets) with the acquisitions of an entire organization (i.e., acquisitions of non-divested targets) abroad. We hypothesize that the ability to select the most valuable assets and leave the unwanted ones behind affords bidders greater flexibility in acquisitions of assets as opposed to acquisitions of non-divested targets. We apply event study methodology on a sample of 2137 cross-border M&As from 1986 to 2009 to test our hypothesis. Consistent with our proposition, we find that bidders fare better in acquisitions of divested assets. Our various market-based measures of performance are overwhelmingly in favor of these kinds of acquirers. Consistent with the wealth effects, we also find that the cost of capital charged to buyers of divisions/subsidiaries/assets of an organization is lower compared to buyers of whole/parent corporations abroad. Overall, our findings suggest that bidders who are in a position to bid for specific divisions or subsidiaries or assets of a foreign corporation rather than acquire the whole corporation can extract larger benefits.

History

Publication status

  • Published

Journal

International Business Review

ISSN

0969-5931

Publisher

Elsevier

Issue

2

Volume

24

Page range

235-245

Department affiliated with

  • Business and Management Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2015-02-09

Usage metrics

    University of Sussex (Publications)

    Categories

    No categories selected

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC