Short Term Value Creation for Shareholders Through Corporate Selloffs in the Nordic Region

Abstract

The purpose of this study is to investigate the factors influencing the short-term value creation for shareholders in the Nordic region. The study aims to answer this by applying the event study methodology in the period between 2010 and 2019. To conduct thisstudy the market model is applied, based on academic reasoning, and prior work in this field. The study applies the parametric t-test, and the non-parametric Wilcoxon sign test, to test for significance, and thereby able to create robust results. The study found an alignment with related studies on this topic. The sample tested contains 145 Sell-off deals conducted by listed Nordic companies on one of the Nordic stock exchanges. In a Nordic context this study presents evidence for a significant positive abnormal return on the announcement date of 1,64%. Furthermore, by extending the event window, the study finds evidence of significant abnormal return in all event windows the methodology is being applied to. The evidence further suggests that the value creation is retained in the immediate period after the announcement. The study finds evidence of relative size and strategic fit between buyer and “target”, to have significant influence on the short-term value creation for the shareholder. Evidence suggests that the biggest contribution to significant value creation is the strategic fit for the buyer as well as relative size of the deal. There is no evidence for the financial situation and geographic focus to have a significant influence on the short-term value creation for the shareholders of the seller. Furthermore, diverging influence regarding the financial situation of the seller is discovered. The evidence obtained in this study should contribute to a lack of empirical studies regarding the Nordic countries, and thereby increases the knowledge regarding the factors influencing the Nordic countries in relation to Sell-off announcements. Further studies still need to be conducted to continue to increase the studies available within this field.