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The Effect of Voluntary Sell-off Announcements on Shareholder Wealth



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    • The Wharton School, University of Pennsylvania. I would like to thank Bipin Ajinkya, Linda Bamber, Randy Beatty, Bryan Church, Vic Defeo, Pamela Erickson, Robert Radcliffe, E. Dan Smith, Senyo Tse, Ro Verrecchia, and workshop participants at various universities for their helpful comments. All errors are, of course, my own. Financial support by the Ernst and Whinney Foundation is gratefully acknowledged.


Sell-off activities arise when a firm sells part of its assets (e.g., a segment, a division, etc.) but continues to exist in essentially the same form. This study investigates the effect of voluntary sell-offs on stock returns. From a sample of over 1000 sell-off events (first public announcements), the evidence shows that both sellers and buyers earn significant positive excess returns from these transactions. The excess returns earned by buyers are smaller than those earned by sellers. There is also evidence that sell-off announcements are preceded by a period of significant negative returns for the sellers which suggests that the sellers, on average, performed poorly prior to their sell-off activities.

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