Dissertation/Thesis Abstract

Voluntary Disclosure of Strategic Alternatives: A Cost-Benefit Analysis
by Zha, Jenny, Ph.D., University of California, Berkeley, 2016, 146; 10151008
Abstract (Summary)

This dissertation studies a firm’s decision to voluntarily disclose that it is seeking “strategic alternatives,” effectively setting out to explore the potential sale or merger of the company. Firms appear to use these voluntary disclosures to maximize shareholder value and credibly convey private information. Voluntary disclosures of strategic alternatives are associated with a three-day return of +5.8 percent on average. Compared to an entropy-balanced control group with similar characteristics in expectation, disclosing firms that are subsequently acquired experience positive abnormal takeover returns (reflecting benefits from a more favorable sale process and improved information), whereas disclosing firms that are not subsequently acquired experience negative abnormal returns (reflecting costs from more dysfunction). The existence of economically significant costs and benefits is consistent with a general voluntary disclosure framework resulting in a threshold equilibrium. The decision to seek strategic alternatives appears to be prompted by poor performance, poor information environment, and the presence of corporate governance catalysts, namely, blockholders, activists, and golden parachutes.

Indexing (document details)
Advisor: Sloan, Richard G.
Commitee: Anderson, Michael L., Dechow, Patricia M., Lawrence, Alastair N., Patatoukas, Panos N.
School: University of California, Berkeley
Department: Business Administration
School Location: United States -- California
Source: DAI-A 78/01(E), Dissertation Abstracts International
Subjects: Accounting
Keywords: Activism, Corporate governance, Golden parachute, Stock prices, Takeover, Voluntary disclosure
Publication Number: 10151008
ISBN: 9781369057720
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