What Have We Acquired and What Should We Acquire in Divestiture Research? A Review and Research Agenda

Divestiture and Firm Performance: A Meta-Analysis

The divestment of international retail operations is an under‐explored area of research. Conceptual and theoretical developments within retailing have tended to focus on those organisations that have sustained international development rather than on those organisations who have experienced market failure and strategic withdrawals from international markets. The paper discusses two prominent UK cases where market withdrawal has been a feature of international activity. A cross‐case analysis is then used to identify issues for further research activity. In particular, the cross‐case analysis uses the existing constructs that have emerged from the general literature to explain divestment activity while highlighting the limitations of using these constructs within the retail sector. The paper concludes by noting the limitations of existing frameworks that seek to explain the internationalisation process without due consideration of the divestment process.

International retail divestment

Although international entry and expansion has been a particularly important topic in the literature, there has been little research effort to explain firms' exit decisions from foreign markets. Drawing on the notion of fit theory together with moderation contingent logic, this study investigates the effects of international performance and internal strategic fit as well as the moderating impact of cultural distance and international experience on the firm's exit decision. The results indicate that strategic misfit and poor international performance have a detrimental effect on the firm's survival in the foreign market. Furthermore, the results suggest that cultural distance moderates the impact of the internal strategic fit and international performance on the exit decision. In addition, the authors find a significant three-way interaction between international performance, cultural distance, and international experience. Using data collected from multiple informants in Chinese outward foreign d...

Exit from a Foreign Market: Do Poor Performance, Strategic Fit, Cultural Distance, and International Experience Matter?

Research Summary: This study analyzes how the divestitures that are impelled by activist investors in their campaigns against public corporations affect shareholder value. Using hand‐collected data on the activist campaigns that were launched against and the divestitures that were undertaken by Fortune 500 companies between 2007 and 2015, we find that activist‐impelled divestitures are more positively associated with immediate and longer‐term measures of shareholder value than comparable manager‐led divestitures. These performance differences persist for nearly two years after the completion of these deals. Our results empirically test the idea that firms with agency problems unlock shareholder value when they divest, and support the notion that activist investors fulfill an important external governance function. Our work also opens new research opportunities and offers practical implications as well. Managerial Summary: This study investigates how divestitures that are undertaken at the behest of activist investors affect shareholder value. We find that divestitures that were undertaken under pressure from activist investors are associated with more positive shareholder returns than comparable divestitures that were undertaken voluntarily by managers. These performance differences persist for nearly two years after the completion of these deals, alleviating concerns about the purported short‐termism of activist investors. Our findings suggest that activist investors may fulfill an important governance function by inducing managers to undertake strategies that they might not otherwise pursue, thereby unlocking shareholder value.

Activist‐impelled divestitures and shareholder value

Good and bad divestment: The stock market verdict

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Good and bad divestment: The stock market verdict