Management Papers

Document Type

Journal Article

Date of this Version

3-2016

Publication Source

Strategic Management Journal

Volume

37

Issue

3

Start Page

429

Last Page

446

DOI

10.1002/smj.2329

Abstract

This paper investigates the relationship between divestitures and firm value in family firms. Using hand-collected data on a sample of over 30,000 firm-year observations, we find that family firms are less likely than non-family firms to undertake divestitures, especially when these companies are managed by family rather than non-family-CEOs. However, we then establish that the divestitures undertaken by family firms, predominantly those run by family-CEOs, are associated with higher post-divestiture performance than their non-family counterparts. These findings indicate that family firms may fail to fully exploit available economic opportunities, potentially because they pursue multiple objectives beyond the maximization of shareholder value. These results also elucidate how the characteristics of corporate owners and managers can influence the value that firms derive from their corporate strategies.

Copyright/Permission Statement

This is the peer reviewed version of the following article: Feldman, E. R., Amit, R. and Villalonga, B. (2016), Corporate divestitures and family control. Strat. Mgmt. J., 37: 429–446., which has been published in final form at doi: 10.1002/smj.2329. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms.

Keywords

family firms, divestitures, corporate strategy, agency theory, CEOs

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Date Posted: 27 November 2017

This document has been peer reviewed.