Abstract:

The paper presents the empirical results of several hypotheses deals with factors that influence corporate restructuring in the form of asset’s sales. The estimation of short-term wealth effects  at 21 days around the sell off announcement for five BRICS markets and 1247 events shows positive reaction with cumulative abnormal returns (CARs) of 1,2 % for two-day announcement windows (−1;0) and of 1,28% for  five-day announcement windows (-3; 1). The method of calculation the normal daily return  does not change the testing results. The  analysis  of completed sell off transactions with a deal value  more than US$ 5 million demonstrates that overleverage can be considered as a significant motive for break-ups decisions.  The financial and focused hypotheses  can not be rejected for BRICS firms. The logit model identifies the divestitures factors for 780 BRICS firms on the period 2000-2016. We econometrically (cross-sectional multivariate analysis) estimated factors that determine CAR on the event window (-3; 1). The paper is focused on the parent’s debt measures, CEO power and state ownership in the explaining the company's exit choice. Several indicators measure the company's financial distress in current study, including traditional (debt to equity, net debt ratio) and original (overleverage, as the excess of the actual debt over the target level).