REINTERPRETATION OF THE SHAREHOLDER GAINS IN SELLOFF TRANSACTIONS.

Our results for buyers and sellers are consistent with those found in prior research. Sellers gain in voluntary selloff transactions, and buyers gain only slightly. A combination of buyers and sellers in value-weigh ted portfolios, however, wipes out these announcement period gains because the value-weighted portfolio reflects the weighted combination of abnormal returns. Apparently losses to some buyers offsets seller gains. The portfolios only gain if there is synergy created by the selloff (and purchase) of the assets. Since 89 out of 182 (49 percent) portfolios lose in our matched-pair tests, our results cast doubt on the conclusion that selloff activity is generally synergistic. Synergy does appear to be created in 93 out of our 182 (51 percent) selloff portfolios. Only 25 percent of our sample portfolios gain when both the seller and buyer shareholders gain. In 54 percent of the portfolios there is an opposite price effect between buyers and sellers. These results lend some support to the wealth transfer hypothesis. However, the wealth transfers go from buyer to seller 51 times and from seller to buyer 47 times. Roll's (1986) Hubris hypothesis implies that overbidding would transfer wealth from buyer to seller. Our results do not find overwhelming support for this hypothesis since the wealth transfer often occurs in the other direction. Our results only test the market's perception of the synergy to be created by the selloff. In an efficient market this perception should be unbiased, but it would be necessary to trace these companies through time to actually determine if the transactions are synergistic. Past research has shown that sellers gain and that buyers (may) gain, with the conclusion that selloffs create synergy. The existing size difference between buyers and sellers in this study, however, shows that equally-weighted results can be biased. In 87 percent of our portfolios there is a large size difference between buyers and sellers. Large buyers win more often than small buyers. Small sellers win more often than large sellers. We conclude, therefore, that while some selloffs are synergistic, there are others in which a wealth transfer occurs between buyers and sellers. Future research should focus on the factors and characteristics of the buyers, the sellers, and the portfolios which lead to synergistic or non-synergistic selloffs. [ABSTRACT FROM AUTHOR]