The Impact of Divestment on Firm Performance: Empirical Evidence from a Panel of UK Companies

24 Pages Posted: 5 May 2003

See all articles by Michelle Haynes

Michelle Haynes

University of Nottingham

Mike Wright

Nottingham University Business School

Steve Thompson

University of Leicester - Department of Economics

Abstract

It has widely been suggested that during the 1980s many diversified firms narrowed the scope of their activities by refocusing on core businesses, primarily through divestment activity. This study examines the impact of divestment on firm performance, using an unbalanced panel of 132 UK quoted companies over the period 1985 to 1993. The results suggest that divestment has a positive, significant and substantial effect in raising the profitability of the vendor company. We find limited support for the view that the benefit from divestment is greater for larger and/or more diversified firms and firms operating with weak governance arrangements.

Suggested Citation

Haynes, Michelle and Wright, Mike and Thompson, Steve, The Impact of Divestment on Firm Performance: Empirical Evidence from a Panel of UK Companies. Available at SSRN: https://ssrn.com/abstract=313492

Michelle Haynes (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Mike Wright

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5257 (Phone)
+44 115 951 5204 (Fax)

Steve Thompson

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom
+44 116 252 2897 (Phone)

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