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Which governance characteristics affect the incidence of divestitures in Australia?

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.
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Contributor : Camille Morin <>
Submitted on : Friday, September 23, 2016 - 11:01:55 AM
Last modification on : Friday, December 13, 2019 - 2:32:02 PM

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Pascal Nguyen, Nahid Rahman. Which governance characteristics affect the incidence of divestitures in Australia?. Australian Journal of Management, SAGE Publications (UK and US), 2014, pp.351-374. ⟨10.1177/0312896213517517⟩. ⟨halshs-01370690⟩



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