Which governance characteristics affect the incidence of divestitures in Australia?

Pascal Nguyen and Nahid Rahman

Australian Journal of Management, 2015, vol. 40, issue 2, 351-374

Abstract: Event studies indicate that divestitures create shareholder value. However, managers are generally disinclined to execute a divestiture due to their inherent preferences for growing the firm’s assets. Governance structures can play a significant role in restraining this agency conflict. Using a sample of divestitures carried out by Australian firms over a recent 10-year period, we find that board compensation and ownership concentration increase the likelihood of a divestiture. In addition, board compensation has a stronger effect in firms that are more likely to divest, while larger boards inhibit divestitures in firms that are less likely to divest. Our analysis involves a propensity score matching method. We show that poor matching can lead to large biases and inconsistencies.

Keywords: Agency conflicts; corporate governance; divestiture; matching; propensity score; restructuring (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/0312896213517517 (text/html)

Related works:
Working Paper: Which governance characteristics affect the incidence of divestitures in Australia? (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:40:y:2015:i:2:p:351-374

DOI: 10.1177/0312896213517517

Access Statistics for this article

More articles in Australian Journal of Management from Australian School of Business
Bibliographic data for series maintained by SAGE Publications ().