Evidence on Divestment Motives: An Overview

Abstract

Corporate divestiture represents an important component of a firm’s strategy. Divestment takes different forms and is usually undertaken for a variety of general and firm-specific reasons. The objective of this article is to provide an overview and assessment of the current consensus on the empirical evidence on underlying divestiture motives. What is the direction of the literature on the antecedents of divestment? Are there important lessons to be learned from dominant and underexplored themes? We embark on the answers to these questions by analysing the existing empirical literature and providing an informative and instructive synopsis. Our synopsis contributes to the literature by integrating antecedents of divestiture from the multiple strands and synthesizing potentially rich areas of further exploration in the literature. Performance remains the dominant factor in divestiture but there is strong evidence that divestment is the result of a multitude of interacting dynamics among various factors. There remain considerable opportunities in the literature on the economics of divestiture, emerging environmental, social and governance (ESG) and its theoretical underpinnings and the general divestment theory. Divestment, Divestiture, Industrial Organization, Portfolio Management, Strategic Management, Foreign Investment, Mergers and Acquisitions, ESG JEL Classification: D22, F23, F30, G32, G34, L25, M12