Practice makes Progress: Evidence from Divestitures

68 Pages Posted: 18 Aug 2013 Last revised: 10 Jul 2019

See all articles by Mark Humphery-Jenner

Mark Humphery-Jenner

UNSW Business School; Financial Research Network (FIRN)

Ronan Powell

University College Dublin (UCD) - Michael Smurfit Graduate School of Business

Emma Jincheng Zhang

Monash University

Date Written: July 8, 2019


This paper examines the role of firm-level experience in the context of divestitures. We find that divesting firms that have recent divestiture experience (hereafter, experienced divestors) are more likely to sell peripheral or underperforming units, and to divest during industry merger waves. Experienced divestors earn higher returns on divestiture announcement, have stronger operating performance post-divestiture, and tend to reinvest sale proceeds in expansion programs using acquisitions. Importantly, we show that divestiture experience at the firm level dominates other measures of experience, including divestiture experience of CEOs or boards, and experience in acquisitions. We take steps to mitigate concerns about econometric and sampling issues. These findings suggest that a strategy of restructuring through divestitures can improve firm value.

Keywords: Divestitures; Organizational Experience; Learning; Restructuring; Takeovers

JEL Classification: D83, G34

Suggested Citation

Humphery-Jenner, Mark and Powell, Ronan G. and Zhang, Emma Jincheng, Practice makes Progress: Evidence from Divestitures (July 8, 2019). Journal of Banking and Finance, Vol. 105, 2019, UNSW Australian School of Business Research Paper No. 2013 BFIN 09, 26th Australasian Finance and Banking Conference 2013, Available at SSRN: or

Mark Humphery-Jenner

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane


Ronan G. Powell

University College Dublin (UCD) - Michael Smurfit Graduate School of Business ( email )

Blackrock, Co. Dublin

Emma Jincheng Zhang (Contact Author)

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800

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