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Value Creation of Corporate Restructuring

A Market Cycle and Industry View

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Ulrich Erxleben

The study offers a contribution to the debate about shareholder wealth creation following corporate restructuring transactions. Including market cycle and industry factors, it provides an analysis of merger and acquisition (M&A) and corporate divestiture success between 1989 and 2008 in Europe. The first part of the study focuses on effects of market valuation levels and market cycles on the value creation potential of corporate restructuring. The second part discusses mergers and acquisitions and divestment success from an industry perspective. The results provide surprising insights into drivers of shareholder value creation.
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8. Summary and Conclusion

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8.  Summary and Conclusion

The presented study examines short- and long-term value creation of corporate restructuring from a market cycle and industry perspective. An initial analysis of corporate restructuring in Europe in Chapter 2 shows that large variations exist with regard to shareholder wealth effects of corporate restructuring over time and between industries. This finding forms the research interest of this thesis. The question arose whether market cycles and industry determinants are able to explain or eventually even predict these variations in corporate restructuring success. In contrast to the majority of previous studies, this analysis entails both forms of corporate restructuring: mergers and acquisitions (M&A) as well as corporate divestitures. The analysis is based on a large sample of European corporate restructuring transactions allowing for a comprehensive analysis of the determinants of shareholder wealth creation. The study focuses on value effects from an acquirer's (for the analysis of M&A) and seller's (for the analysis of divestments) shareholder perspective. Subject of analysis are corporate restructuring transactions that result in the transfer of majority stakes and subsequently control rights between unrelated buyers and sellers. In order to identify value effects, various empirical methods are applied. Focus of the analysis are stock market effects that result from corporate restructuring events. Event studies in a short- and long-term perspective are applied. In addition to the widely used announcement return analysis, both commonly used long-term approaches, buy-and-hold abnormal returns in event-time, and calendar-time abnormal returns based on a 4-factor...

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