Journal article
Foreign and Domestic Divestments: Evidence on Valuation Effects of Plant Closings
Journal of international business studies, v 23(2)
01 Apr 1992
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
A sample of 928 plant closing announcements was assembled by searching the Wall Street Journal Index for 1980-1986. The final sample consisted of 282 announcements. Domestic plant closings comprised 233 announcements made by 159 firms, and foreign plant closings comprised 49 announcements made by 43 firms. It was found that foreign plants are closed primarily for plant-specific reasons, while domestic plants are closed for firm-wide reasons. Results suggest that closings of foreign plants indicate declining arbitrage opportunities. Closing of domestic plants indicate problems in production costs or product demand. In addition, plant closing announcements produce a negative stock price reaction. This reaction is statistically significant for domestic plants and insignificant for foreign plants. When the closed plant represents a large portion of firm size, the reaction to the announcement is stronger, particularly in the case of domestic plant closings. A larger negative effect is also observed for firms with lower rated bonds, both for domestic or foreign plant closings.
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Details
- Title
- Foreign and Domestic Divestments: Evidence on Valuation Effects of Plant Closings
- Creators
- George Tsetsekos - Drexel UniversityMichael Gombola - Drexel University
- Publication Details
- Journal of international business studies, v 23(2)
- Publisher
- Palgrave Macmillan
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Finance
- Web of Science ID
- WOS:A1992JB48100001
- Scopus ID
- 2-s2.0-0008796807
- Other Identifier
- 991019173726204721
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- Web of Science research areas
- Business
- Management