Ownership structure and divestiture decisions: Evidence from Australian firms

Pascal Nguyen, Nahid Rahman and Ruoyun (Lucy) Zhao ()

International Review of Financial Analysis, 2013, vol. 30, issue C, 170-181

Abstract: Divestitures create shareholder value by helping firms to optimize their portfolio of assets. However, firms may forego value enhancing divestitures because of agency problems. More specifically, large controlling shareholders may prefer to retain the assets in order to extract private benefits of control at the expense of minority shareholders. In this paper, we explore the role that other blockholders play in constraining the largest shareholder's influence. The results indicate that divestiture activity decreases with the ownership of the largest shareholder. The presence of another significant blockholder appears to curb this negative bias towards divestitures. Our findings provide an economic rationale for the higher performance of firms characterized by more balanced ownership structures. Involvement of family owners also appears to provide similar benefits.

Keywords: Divestitures; Restructuring; Propensity score matching; Ownership; Private benefits (search for similar items in EconPapers)
JEL-codes: G31 G32 G34 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:30:y:2013:i:c:p:170-181

DOI: 10.1016/j.irfa.2013.08.003

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