The Journal of Finance

The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.

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The Effect of Long‐Term Performance Plans on Corporate Sell‐Off‐Induced Abnormal Returns

Published: 09/01/1987   |   DOI: 10.1111/j.1540-6261.1987.tb03920.x

HASSAN TEHRANIAN, NICKOLAOS G. TRAVLOS, JAMES F. WAEGELEIN

This study examines the association between long‐term performance plans and wealth effects accruing to stockholders of divesting firms at announcements of sell‐off proposals. The results indicate that divesting companies with long‐term performance plans experience a more favorable stock market reaction at the announcement of sell‐off proposals relative to firms without long‐term performance plans. The findings imply that long‐term performance plans serve as an effective mechanism to motivate managers to make better decisions.