The diversity of divestiture– stock market reactions around the announcements of divestiture programs

Ludwig Erl (), Florian Kiesel () and Dirk Schiereck ()
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Ludwig Erl: Technical University of Darmstadt
Florian Kiesel: Free University of Bozen-Bolzano
Dirk Schiereck: Technical University of Darmstadt

Review of Managerial Science, 2025, vol. 19, issue 9, No 4, 2729-2773

Abstract: Abstract Single divestitures can adjust a firm’s strategy, while divestiture programs, a series of divestitures with a common rationale, may considerably change a firm’s business. However, this does not always imply a positive impact. Existing evidence on how capital markets evaluate these decisions lacks validation based on the firm’s strategic background. This paper fills this gap by examining stock market reactions to divestiture program announcements, conditional on the firm’s current situation. We explore five key antecedents likely to influence divestiture program decisions: CEO turnover, new blockholder, financial distress, prior divestiture experience, and industry divestiture waves. Examining more than 100 European firms and their divestiture disclosures, our results show that firms announce divestiture programs when financially distressed or after a change in the top management. Market reactions vary but are more positive when program value is disclosed, especially for financially driven programs or those programs which are part of broader restructuring initiatives.

Keywords: Divestiture programs; Management turnover; Financial distress; Signaling (search for similar items in EconPapers)
JEL-codes: G14 G32 G34 L25 M10 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11846-024-00830-5

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