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The diversity of divestiture– stock market reactions around the announcements of divestiture programs

Author

Listed:
  • Ludwig Erl

    (Technical University of Darmstadt)

  • Florian Kiesel

    (Free University of Bozen-Bolzano)

  • Dirk Schiereck

    (Technical University of Darmstadt)

Abstract

Single divestitures can adjust a firm’s strategy, while divestiture programs, a series of divestitures with a common rationale, may considerably change a firm’s business. However, this does not always imply a positive impact. Existing evidence on how capital markets evaluate these decisions lacks validation based on the firm’s strategic background. This paper fills this gap by examining stock market reactions to divestiture program announcements, conditional on the firm’s current situation. We explore five key antecedents likely to influence divestiture program decisions: CEO turnover, new blockholder, financial distress, prior divestiture experience, and industry divestiture waves. Examining more than 100 European firms and their divestiture disclosures, our results show that firms announce divestiture programs when financially distressed or after a change in the top management. Market reactions vary but are more positive when program value is disclosed, especially for financially driven programs or those programs which are part of broader restructuring initiatives.

Suggested Citation

  • Ludwig Erl & Florian Kiesel & Dirk Schiereck, 2025. "The diversity of divestiture– stock market reactions around the announcements of divestiture programs," Review of Managerial Science, Springer, vol. 19(9), pages 2729-2773, September.
    • Handle: RePEc:spr:rvmgts:v:19:y:2025:i:9:d:10.1007_s11846-024-00830-5
    DOI: 10.1007/s11846-024-00830-5
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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