Working Paper
The authors present preliminary evidence on stock market reaction to divestiture announcements by European firms: divestitures by French, German, Swedish and UK firms. Their complete sample includes divestitures by firms in Belgium, Netherlands, Denmark, Finland, Norway, Switzerland, Italy, Spain, Ireland. Included are: 1- stock price reaction during initial announcements of domestic subsidiary sell-offs positive and consistent with the US evidence, 2- in contrast to sellers in the US, European seller performance improves substantially for the 60 trading days following the event, 3- subtantial information leakages in European countries many trading days prior to the initial announcement of the event to the press, 4- differences across countries in the way cumulative abnormal returns are distributed between sellers divesting domestic subsidiaries and sellers divesting foreign subsidiary, 5- extent of information asymmetries between seller and buyers has an impact on the level of the underpricing of the sal.
