Hostname: page-component-cd9895bd7-mkpzs Total loading time: 0 Render date: 2024-12-23T19:18:42.810Z Has data issue: false hasContentIssue false
  • English
  • Français

Divestiture and Its Market Reaction in a Consolidating Industry: The Global Brewing Industry

Published online by Cambridge University Press:  08 March 2021

Ludwig Erl  and
Florian Kiesel Open the ORCID record for Florian Kiesel [Opens in a new window]
Ludwig Erl
Affiliation:
Department of Business Administration, Economics and Law, Technische Universität Darmstadt, 64289Darmstadt, Germany; e-mail: [email protected].
Florian Kiesel*
Affiliation:
Grenoble Ecole de Management, 38000Grenoble, France
*
e-mail: [email protected] (corresponding author).
Get access Rights & Permissions [Opens in a new window]

Abstract

This study provides a perspective on the market performance of divestitures in the global brewing industry. In 2018, the five largest players accounted for 60% of the global beer volume. We analyze to what extent the capital market values divestitures in an industry where players usually seek efficiency gains and growth through mergers and acquisitions. Based on a sample of 61 divestiture intent announcements in the period from 1999–2018, this study shows that publicly listed brewing groups experience significant positive abnormal returns of about 1.4%. We measure the influential effect of success determinants concerning the underlying industry, the divested business, the divestiture structure, and the divestor itself. (JEL Classifications: G14, G34, L25, Q14)

Keywords

brewing industrydivestitureevent studyindustry consolidation
Type
Articles
Information
Journal of Wine Economics , Volume 16 , Issue 3 , August 2021 , pp. 239 - 259
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of American Association of Wine Economists

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We thank an anonymous reviewer and Karl Storchmann (the Editor) for their useful comments that greatly improved the quality of this article. This article is a shortened version of a study undertaken as part of the PhD dissertation of Ludwig Erl. This research did not receive any financial support.

References

Adams, W. J. (2006). Markets: Beer in Germany and the United States. Journal of Economic Perspectives, 20(1), 189–205.10.1257/089533006776526120CrossRefGoogle Scholar
Afshar, K. A., Taffler, R. J., and Sudarsanam, P. S. (1992). The effect of corporate divestments on shareholder wealth: The UK experience. Journal of Banking & Finance, 16(1), 115–135.10.1016/0378-4266(92)90081-ACrossRefGoogle Scholar
Ashenfelter, O. C., Hosken, D. S., and Weinberg, M. C. (2015). Efficiencies brewed: Pricing and consolidation in the US beer industry. RAND Journal of Economics, 46(2), 328–361.10.1111/1756-2171.12092CrossRefGoogle Scholar
Berger, P. G., and Ofek, E. (1995). Diversification's effect on firm value. Journal of Financial Economics, 37(1), 39–65.10.1016/0304-405X(94)00798-6CrossRefGoogle Scholar
Berger, P. G., and Ofek, E. (1999). Causes and effects of corporate refocusing programs. Review of Financial Studies, 12(2), 311–345.10.1093/rfs/12.2.311CrossRefGoogle Scholar
Bergh, D. D. (1995). Size and relatedness of units sold: An agency theory and resource-based perspective. Strategic Management Journal, 16(3), 221–239.10.1002/smj.4250160306CrossRefGoogle Scholar
Bergh, D. D. (1998). Product-market uncertainty, portfolio restructuring, and performance: An information-processing and resource-based view. Journal of Management, 24(2), 135–155.10.1177/014920639802400201CrossRefGoogle Scholar
Bergh, D. D., and Sharp, B. M. (2015). How far do owners reach into the divestiture process? Blockholders and the choice between spin-off and sell-off. Journal of Management, 41(4), 1155–1183.10.1177/0149206312456705CrossRefGoogle Scholar
Boehmer, E., Musumeci, J., and Poulsen, A. B. (1991). Event-study methodology under conditions of event-induced variance. Journal of Financial Economics, 30(2), 253–272.10.1016/0304-405X(91)90032-FCrossRefGoogle Scholar
Brauer, M. (2006). What have we acquired and what should we acquire in divestiture research? A review and research agenda. Journal of Management, 32(6), 751–785.10.1177/0149206306292879CrossRefGoogle Scholar
Brauer, M., and Schimmer, M. (2010). Performance effects of corporate divestiture programs. Journal of Strategy and Management, 3(2), 84–109.10.1108/17554251011041760CrossRefGoogle Scholar
Brauer, M., and Wiersema, M. (2012). Industry divestiture waves: How a firm's position influences investor returns. Academy of Management Journal, 55(6), 1472–1492.10.5465/amj.2010.1099CrossRefGoogle Scholar
Brauer, M., Mammen, J., and Luger, J. (2017). Sell-offs and firm performance: A matter of experience? Journal of Management, 43(5), 1359–1387.10.1177/0149206314552452CrossRefGoogle Scholar
Chalk, A. J. (1988). Competition in the brewing industry: Does further concentration imply collusion? Managerial and Decision Economics, 9(1), 49–58.10.1002/mde.4090090106CrossRefGoogle Scholar
Chang, S. J., and Singh, H. (1999). The impact of modes of entry and resource fit on modes of exit by multibusiness firms. Strategic Management Journal, 20(11), 1019–1035.10.1002/(SICI)1097-0266(199911)20:11<1019::AID-SMJ66>3.0.CO;2-93.0.CO;2-9>CrossRefGoogle Scholar
Çolak, G., and Whited, T. M. (2007). Spin-offs, divestitures, and conglomerate investment. Review of Financial Studies, 20(3), 557–595.10.1093/rfs/hhl022CrossRefGoogle Scholar
Cowan, A. R. (1992). Nonparametric event study tests. Review of Quantitative Finance and Accounting, 2(4), 343–358.10.1007/BF00939016CrossRefGoogle Scholar
Depecik, B., van Everdingen, Y. M., and van Bruggen, G. H. (2014). Firm value effects of global, regional, and local brand divestments in core and non-core businesses. Global Strategy Journal, 4(2), 143–160.10.1111/j.2042-5805.2014.1074.xCrossRefGoogle Scholar
Dickerson, A. P., Gibson, H. D., and Tsakalotos, E. (1997). The impact of acquisitions on company performance: Evidence from a large panel of UK firms. Oxford Economic Papers, 49(3), 344–361.10.1093/oxfordjournals.oep.a028613CrossRefGoogle Scholar
Dittmar, A., and Shivdasani, A. (2003). Divestitures and divisional investment policies. Journal of Finance, 58(6), 2711–2744.10.1046/j.1540-6261.2003.00620.xCrossRefGoogle Scholar
Ebneth, O., and Theuvsen, L. (2007). Large mergers and acquisitions of European brewing groups—Event study evidence on value creation. Agribusiness: An International Journal, 23(3), 377–406.10.1002/agr.20129CrossRefGoogle Scholar
Elzinga, K. G., and Swisher, A. W. (2011). Developments in US merger policy: The beer industry as lens. In Swinnen, Johan F. M. (ed.), The Economics of Beer, 196–212. New York: Oxford University Press.Google Scholar
Elzinga, K. G., Tremblay, C. H., and Tremblay, V. J. (2015). Craft beer in the United States: History, numbers, and geography. Journal of Wine Economics, 10(3), 242–274.10.1017/jwe.2015.22CrossRefGoogle Scholar
Farris, J., Malone, T., Robison, L. J., and Rothwell, N. L. (2019). Is “localness” about distance or relationships? Evidence from hard cider. Journal of Wine Economics, 14(3), 252–273.10.1017/jwe.2019.42CrossRefGoogle Scholar
Feldman, E. R., Amit, R. R., and Villalonga, B. (2016). Corporate divestitures and family control. Strategic Management Journal, 37(3), 429–446.10.1002/smj.2329CrossRefGoogle Scholar
George, L. M. (2011). The growth of television and the decline of local beer. In Swinnen, Johan F. M. (ed.), The Economics of Beer, 213–226. New York: Oxford University Press.10.1093/acprof:oso/9780199693801.003.0012CrossRefGoogle Scholar
Haynes, M., Thompson, S., and Wright, M. (2002). The impact of divestment on firm performance: Empirical evidence from a panel of UK companies. Journal of Industrial Economics, 50(2), 173–196.10.1111/1467-6451.00173CrossRefGoogle Scholar
Haynes, M., Thompson, S., and Wright, M. (2003). The determinants of corporate divestment: Evidence from a panel of UK firms. Journal of Economic Behavior & Organization, 52(1), 147–166.10.1016/S0167-2681(02)00167-1CrossRefGoogle Scholar
Hearth, D., and Zaima, J. K. (1984). Voluntary corporate divestitures and value. Financial Management, 13(1), 10–16.10.2307/3665119CrossRefGoogle Scholar
Hitt, M. A., Tihanyi, L., Miller, T., and Connelly, B. (2006). International diversification: Antecedents, outcomes, and moderators. Journal of Management, 32(6), 831–867.10.1177/0149206306293575CrossRefGoogle Scholar
Hopkins, H. D. (1991). Acquisition and divestiture as a response to competitive position and market structure. Journal of Management Studies, 28(6), 665–677.10.1111/j.1467-6486.1991.tb00985.xCrossRefGoogle Scholar
Hoskisson, R. E., and Hitt, M. A. (1994). Downscoping: How to tame the diversified firm. New York: Oxford University Press.Google Scholar
Hoskisson, R. O., and Johnson, R. A. (1992). Research notes and communications corporate restructuring and strategic change: The effect on diversification strategy and R&D intensity. Strategic Management Journal, 13(8), 625–634.10.1002/smj.4250130805CrossRefGoogle Scholar
Howard, P. H. (2014). Too big to ale? Globalization and consolidation in the beer industry. In Patterson, M. W. and Pullen, N. H. (eds.), The Geography of Beer, 155–165. The Netherlands: Springer.10.1007/978-94-007-7787-3_14CrossRefGoogle Scholar
Humphery-Jenner, M., Powell, R., and Zhang, E. J. (2019). Practice makes progress: Evidence from divestitures. Journal of Banking & Finance, 105, 1–19.10.1016/j.jbankfin.2019.04.004CrossRefGoogle Scholar
Iwasaki, N., Seldon, B. J., and Tremblay, V. J. (2008). Brewing wars of attrition for profit (and concentration). Review of Industrial Organization, 33(4), 263–279.10.1007/s11151-008-9189-5CrossRefGoogle Scholar
Karrenbrock, J. D. (1990). The internationalization of the beer brewing industry. Review-Federal Bank of St. Louis, 72(6), 3–19.Google Scholar
Kerkvliet, J. R., Nebesky, W., Tremblay, C. H., and Tremblay, V. J. (1998). Efficiency and technological change in the US brewing industry. Journal of Productivity Analysis, 10(3), 271–288.10.1023/A:1018615305725CrossRefGoogle Scholar
Kolev, K. D. (2016). To divest or not to divest: A meta-analysis of the antecedents of corporate divestitures. British Journal of Management, 27(1), 179–196.10.1111/1467-8551.12145CrossRefGoogle Scholar
Landier, A., Nair, V. B., and Wulf, J. (2009). Trade-offs in staying close: Corporate decision making and geographic dispersion. Review of Financial Studies, 22(3), 1119–1148.10.1093/rfs/hhm042CrossRefGoogle Scholar
Lang, L., Poulsen, A., and Stulz, R. (1995). Asset sales, firm performance, and the agency costs of managerial discretion. Journal of Financial Economics, 37(1), 3–37.10.1016/0304-405X(94)00791-XCrossRefGoogle Scholar
Lasfer, M. A., Sudarsanam, P. S., and Taffler, R. J. (1996). Financial distress, asset sales, and lender monitoring. Financial Management, 25(3), 57–66.10.2307/3665808CrossRefGoogle Scholar
Lee, D., and Madhavan, R. (2010). Divestiture and firm performance: A meta-analysis. Journal of Management, 36(6), 1345–1371.10.1177/0149206309360931CrossRefGoogle Scholar
Lynk, W. J. (1985). The price and output of beer revisited. Journal of Business, 58(4), 433–437.10.1086/296308CrossRefGoogle Scholar
Madsen, E. S., Pedersen, K., and Lund-Thomsen, L. (2012). Effects of the M&A wave in the global brewing industry 2000–2010. German Journal of Agricultural Economics, 61(4), 235–243.Google Scholar
Markides, C. C. (1992). The economic characteristics of de-diversifying firms. British Journal of Management, 3(2), 91–100.10.1111/j.1467-8551.1992.tb00038.xCrossRefGoogle Scholar
Markides, C. C. (1995). Diversification, restructuring and economic performance. Strategic Management Journal, 16(2), 101–118.10.1002/smj.4250160203CrossRefGoogle Scholar
Mehta, R., and Schiereck, D. (2012). The consolidation of the global brewing industry and wealth effects from mergers and acquisitions. International Journal of Business and Finance Research, 6(3), 67–87.Google Scholar
Montgomery, C. A., and Thomas, A. R. (1988). Divestment: Motives and gains. Strategic Management Journal, 9(1), 93–97.10.1002/smj.4250090108CrossRefGoogle Scholar
Montgomery, C. A., Thomas, A. R., and Kamath, R. (1984). Divestiture, market valuation, and strategy. Academy of Management Journal, 27(4), 830–840.Google Scholar
Owen, S., Shi, L., and Yawson, A. (2010). Divestitures, wealth effects and corporate governance. Accounting & Finance, 50(2), 389–415.10.1111/j.1467-629X.2009.00332.xCrossRefGoogle Scholar
Patell, J. M. (1976). Corporate forecasts of earnings per share and stock price behavior: Empirical test. Journal of Accounting Research, 14(2), 246–276.10.2307/2490543CrossRefGoogle Scholar
Pinkse, J., and Slade, M. E. (2004). Mergers, brand competition, and the price of a pint. European Economic Review, 48(3), 617–643.10.1016/S0014-2921(02)00328-8CrossRefGoogle Scholar
Poelmans, E., and Swinnen, J. F. M. (2011). A brief economic history of beer. In Swinnen, Johan F. M. (ed.), The Economics of Beer (ch. 1). New York: Oxford University Press.Google Scholar
Powell, R., and Yawson, A. (2005). Industry aspects of takeovers and divestitures: Evidence from the UK. Journal of Banking & Finance, 29(12), 3015–3040.10.1016/j.jbankfin.2004.11.003CrossRefGoogle Scholar
Ravenscraft, D. J., and Scherer, F. M. (1987). Mergers, Sell-offs, and Economic Efficiency. Washington, DC: Brookings Institution Press.Google Scholar
Rizzo, A. M. (2019). Competition policy in the wine industry in Europe. Journal of Wine Economics, 14(1), 90–113.10.1017/jwe.2019.3CrossRefGoogle Scholar
Robinson, R. B., and Pearce, J. A. (1988). Planned patterns of strategic behavior and their relationship to business-unit performance. Strategic Management Journal, 9(1), 43–60.10.1002/smj.4250090105CrossRefGoogle Scholar
Shleifer, A., and Vishny, R. W. (1991). Takeovers in the ’60s and the ’80s: Evidence and implications. Strategic Management Journal, 12(Special Issue), 51–59.10.1002/smj.4250121005CrossRefGoogle Scholar
Shleifer, A., and Vishny, R. W. (1992). Liquidation values and debt capacity: A market equilibrium approach. Journal of Finance, 47(4), 1343–1366.10.1111/j.1540-6261.1992.tb04661.xCrossRefGoogle Scholar
Sicherman, N. W., and Pettway, R. H. (1992). Wealth effects for buyers and sellers of the same divested assets. Financial Management, 21(4), 119–128.10.2307/3665845CrossRefGoogle Scholar
Slade, M. E. (1998). Beer and the tie: Did divestiture of brewer-owned public houses lead to higher beer prices? Economic Journal, 108(448), 565–602.10.1111/1468-0297.00305CrossRefGoogle Scholar
Slade, M. E. (2011). Competition policy towards brewing: Rational response to market power or unwarranted interference in efficient markets? In Swinnen, Johan F. M. (ed.), The Economics of Beer, 173–195. New York: Oxford University Press.10.1093/acprof:oso/9780199693801.003.0010CrossRefGoogle Scholar
Swinnen, J. F. M., and Vandemoortele, T. (2011). Beeronomics: The economics of beer and brewing. In Swinnen, Johan F. M. (ed.), The Economics of Beer, 335–355. New York: Oxford University Press.10.1093/acprof:oso/9780199693801.003.0018CrossRefGoogle Scholar
Vidal, E., and Mitchell, W. (2018). Virtuous or vicious cycles? The role of divestitures as a complementary Penrose effect within resource-based theory. Strategic Management Journal, 39(1), 131–154.10.1002/smj.2701CrossRefGoogle Scholar
Wright, P., and Ferris, S. P. (1997). Agency conflict and corporate strategy: The effect of divestment on corporate value. Strategic Management Journal, 18(1), 77–83.10.1002/(SICI)1097-0266(199701)18:1<77::AID-SMJ810>3.0.CO;2-R3.0.CO;2-R>CrossRefGoogle Scholar