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Large Shareholders, the Board of Directors and the Allocation of Cash Proceeds from Corporate Asset Sell-offs

Ataullah, Ali; Davidson, Ian and Le, Hang (2010). Large Shareholders, the Board of Directors and the Allocation of Cash Proceeds from Corporate Asset Sell-offs. European Financial Management, 16(2) pp. 271–295.

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Recent finance literature suggests that managers of divesting firms may retain cash proceeds from corporate asset sell-offs in order to pursue their own objectives, and, therefore, shareholders' gains due to these deals are linked to a distribution of proceeds to shareholders or to debtholders. We add to this literature by examining the role of various corporate governance mechanisms in the context of the allocation of sell-off proceeds. Specifically, we examine the impact of directors' share-ownership and stock options, board composition and external large shareholdings on (1) shareholders' abnormal returns around asset sell-off announcements, and (2) managers' decision to either retain or distribute (to shareholders or to debtholders) sell-off proceeds. We find that non-executive directors' and CEO's share-ownership and stock options are related to shareholders' gains from sell-offs for firms that retain proceeds. However, corporate governance mechanisms are not significantly related to shareholders' gains for firms that distribute sell-off proceeds. Furthermore, we find that the likelihood of a distribution of proceeds, relative to the retention decision, is increasing in large institutional shareholdings, executive and non-executive directors' share-ownership and non-executive representation in the board.

Item Type: Journal Item
ISSN: 1354-7798
Academic Unit/School: Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL)
Item ID: 50864
Depositing User: Ali Ataullah
Date Deposited: 07 Sep 2017 15:54
Last Modified: 07 Dec 2018 10:56
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