This study investigates the impact of voluntary foreign selloff announcements on shareholder wealth. This paper presents the first evidence that voluntary foreign selloff announcements influence common stock returns of U. S. parent firms. Significantly positive abnormal returns are observed during the announcement period for the full sample. It is also found that while foreign selloffs of operations in developed countries (DCs) result in significantly positive abnormal returns, the returns for selloffs of operations in less developed countries (LDCs) are significantly negative. These empirical findings indicate that the magnitude of wealth effects depends on whether the selloffs are in DCs or LDCs. Furthermore, abnormal returns at the time of selloff announcements are positively affected by degree of foreign involvement by the parent company, thereby providing indirect evidence that the market recognizes the multinationality of a firm selling off foreign operations.

• Ki Hyun Kim