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Article
Publication date: 10 June 2019

Peter M. Tingling, Kamal Masri and Dani Chu

The purpose of this paper is to investigate National Hockey League (NHL) expansion draft decisions to measure divestment aversion and endowment effects, and analyze bias and its…

260

Abstract

Purpose

The purpose of this paper is to investigate National Hockey League (NHL) expansion draft decisions to measure divestment aversion and endowment effects, and analyze bias and its affect on presumed rational analytic decision making.

Design/methodology/approach

A natural experiment with three variables (age, minutes played and presence of a prior relationship with a team’s management), filtered athletes that were exposed or protected to selection. A machine learning algorithm trained on a group of 17 teams was applied to the remaining 13 teams.

Findings

Athletes with pre-existing management relationships were 1.7 times more likely to be protected. Athletes playing fewer relative position minutes were less likely to be protected, as were older athletes. Athlete selection was predominantly determined by time on ice.

Research limitations/implications

This represents a single set of independent decisions using publicly available data absent of context. The results may not be generalizable beyond the NHL or sport.

Practical implications

The research confirms the affect of prior relationships on decision making and provides further evidence of measurable sub-optimal decision making.

Social implications

Decision making has implications throughout human resources and impacts competitiveness and productivity. This adds to the need for managers to recognize and implement de-biasing in areas such as hiring, performance appraisal and downsizing.

Originality/value

This natural experiment involving high-stakes decision makers confirms bias in a setting that has been dominated by students, low stakes or artificial settings.

Details

Sport, Business and Management: An International Journal, vol. 9 no. 3
Type: Research Article
ISSN: 2042-678X

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Article
Publication date: 26 April 2019

Pedro Silva and Antonio Carrizo Moreira

The purpose of this paper is to review the existing research on industrial divestment in order to identify the reasons for it, the process whereby it is achieved, and the outcomes…

1073

Abstract

Purpose

The purpose of this paper is to review the existing research on industrial divestment in order to identify the reasons for it, the process whereby it is achieved, and the outcomes of industrial sell-offs and closures. The study reports the main findings that have gained acceptance in the literature, gaps in the research and potential directions for future research.

Design/methodology/approach

A three stage systematic literature review protocol was used to conduct this review. The results are organized according to an “Antecedents – Process – Outcomes” framework.

Findings

The traditional accounts of industrial divestment have been framed in terms of firms’ weak performance and over-diversification as antecedents to divestment, leading to corporate governance issues. However, the list of antecedents of industrial divestment is more extensive. There is no consensus over the impact of some factors on divestments, as is the case of firm and unit size. The results are not conclusive as to whether firm performance improves after divesting.

Research limitations/implications

Future research should analyze the relationship between the antecedents of investment and divestment. The divestment process is not well studied and more studies that engage in theory building are needed, namely, on primary data and examining the short-term and long-term impacts of divestment on performance.

Practical implications

This review offers a comprehensive synthesis of the antecedents, the process and outcomes of divestment through sell-offs and closures. Factors such as environmental conditions and the entry mode strategy are important in determining the divestment of subsidiaries. Divestments may be positively or negatively regarded by shareholders, depending on the context of the firm. Promoting managerial changes facilitates divestment.

Originality/value

This paper synthesizes knowledge of the main reasons as to why firms completely dispose of their assets, contributing to this under-researched field.

Details

Baltic Journal of Management, vol. 14 no. 3
Type: Research Article
ISSN: 1746-5265

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Article
Publication date: 14 February 2022

Jose Luis Castro Iglesias

Although being fired up about changes such as firm expansion, chief executive officers (CEOs) have a hard time with changes that involve divesting businesses or downsizing…

173

Abstract

Purpose

Although being fired up about changes such as firm expansion, chief executive officers (CEOs) have a hard time with changes that involve divesting businesses or downsizing operations. This study aims to examine how a particular psychological process – regulatory focus – serves as a managerial exit barrier in the context of store closings in the US retail industry. This study also examines how a particular corporate governance mechanism, the board of directors, moderates the relationship between CEO regulatory focus and divestment activity.

Design/methodology/approach

This study content-analyzed letters to shareholders to measure the regulatory focus of retail CEOs and used negative binomial regression to test the effect of the CEO’s regulatory focus and board independence on store closure activity.

Findings

The two motivation orientations – promotion and prevention – focuses have distinct effects on store closure decisions. As predicted, promotion-focused CEOs, who value attainment and growth, resist “pulling the plug.” Conversely, prevention-focused CEOs, who are more sensitive to losses, are more inclined to close stores. Independent boards decrease the CEOs’ resistance to “pull the plug” only when necessary, which is the case when CEOs have less vigilant tendencies.

Research limitations/implications

This study contributes to the strategy and marketing literature. It examines an individual-level antecedent of store closure decisions and responds to the call for research on the effect of regulatory focus on divestment decisions.

Practical implications

Leaders themselves can be a source of resistance to change. The findings suggest the importance of boards hiring CEOs psychologically aligned with the firms’ strategic priorities. Promotion-focused CEOs may be a better fit for companies engaged in growth and acquisition. By contrast, prevention-focused CEOs may be a better fit for firms involved in retrenchment and restructuring. Independent boards still have the power to influence CEO decisions in the case of a misfit, as the findings suggest.

Originality/value

This study examines divestment decisions during the “retail apocalypse” and provides empirical evidence for the existence of managerial exit barriers, first introduced by Michael Porter.

Details

International Journal of Organizational Analysis, vol. 31 no. 6
Type: Research Article
ISSN: 1934-8835

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Article
Publication date: 1 March 1987

R.S. Thompson and M. Wright

In both the United States and Europe there has been a spectacular growth in the number and importance of management buy‐outs since the late 1970s. The typical characteristics of…

90

Abstract

In both the United States and Europe there has been a spectacular growth in the number and importance of management buy‐outs since the late 1970s. The typical characteristics of these deals differ somewhat on either side of the Atlantic in ways which are outlined below. However, in each environment the term “buy‐out” refers essentially to the transfer of ownership of the assets of an existing firm — which may itself be an independent entity or a wholly‐owned subsidiary or division — to a new and especially established group of equity holders which intends to keep at least some of those assets in their former use. In the US buy‐outs have often involved very large asset transfers, indeed multi‐billion dollar deals have been quite frequent. The transaction is typically financed by a limited subscription of equity from specialist venture capitalists and perhaps from the firm's management, together with a very large input of debt capital. The latter has often been in the form of high coupon (so called “junk”) bonds. The characteristically high ratio of debt to equity in buy‐out finance has given rise to their American description as leveraged buy‐outs.

Details

Journal of Economic Studies, vol. 14 no. 3
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 9 December 2019

Sina Amiri, David King and Samuel DeMarie

There are multiple perspectives of divestiture and its performance that require reconciliation. While research finds a positive market response to divestment announcement…

479

Abstract

Purpose

There are multiple perspectives of divestiture and its performance that require reconciliation. While research finds a positive market response to divestment announcement, divestiture of prior acquisitions are generally viewed negatively. The purpose of this paper is to develop and empirically test different explanations for the divestment of prior acquisitions.

Design/methodology/approach

This research employs event study to capture market reaction at acquisition announcement and subsequent divestments in a sample of 69 public US high-technology acquisitions between 2003 and 2008 that were divested by 2015. Only initial acquisitions involving public firms were included from the Thomson One Banker SDC database. Public press releases and companies’ SEC filings were reviewed to track divestitures back to prior acquisitions. Ordinary least squared regression was used to estimate coefficients.

Findings

Results indicate a positive relation between acquisition and divestiture performance around announcement dates. This finding rejects the correction of mistake explanation, suggesting that a negative stigma surrounding divestments is largely unwarranted and that investors reward capable acquirer’s divestiture decisions.

Practical implications

Investors do not treat all information signals at divestiture equally. For example, acquisitions made by larger and more profitable firms, or acquisitions paid for with stock, are associated with lower return upon divestiture announcement.

Originality/value

This study finds that investors view divestiture as a proactive strategy, suggesting firms can improve performance by actively managing acquisitions and divestments to optimize their portfolio of businesses.

Details

Journal of Strategy and Management, vol. 13 no. 1
Type: Research Article
ISSN: 1755-425X

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Book part
Publication date: 16 August 2023

Julia M. Puaschunder

Abstract

Details

Responsible Investment Around the World: Finance after the Great Reset
Type: Book
ISBN: 978-1-80382-851-0

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Article
Publication date: 16 January 2024

Ralitza Nikolaeva, Sean Field and Aliya Tskhay

The study examines the diversity of ethical motivations for investments in fossil fuels amid growing calls to decarbonize. Faced with the dilemma between energy needs and net-zero…

251

Abstract

Purpose

The study examines the diversity of ethical motivations for investments in fossil fuels amid growing calls to decarbonize. Faced with the dilemma between energy needs and net-zero commitments, managers need to reconcile seemingly irreconcilable external pressures. The purpose is to provide insights into the ethics justifying their investment decisions.

Design/methodology/approach

The authors draw on ethnographic research, participant observation and interviews with oil and gas executives, private equity partners, managing directors, bankers, lawyers, consultants and engineers in the US and the UK.

Findings

The findings show how managers in the oil and gas ecosystem motivate their actions in response to external pressures for decarbonization. The leitmotif is that they do the right thing even if they acknowledge that not all stakeholders agree. The findings provide insights into why net-zero pledges have failed to stem the flow of capital into fossil fuels.

Practical implications

The authors propose a nuanced engagement with stakeholders that goes beyond risk-return calculations on investments in hydrocarbons. Recognizing the diversity of ethical perspectives, money managers have the opportunity to engage institutional constituents as owners of the collective pools of capital rather than just as beneficiaries in making investment decisions.

Social implications

Money managers should be more engaged with stakeholders whose well-being depends on the funds' investments. They could facilitate the creation of partnerships with public and private organizations such as banks, national funds, city governments, pension funds, foundations, universities and religious organizations. It would be beneficial to all stakeholders to understand the nuanced and varied ethical frameworks that inform hydrocarbon investment and divestment decisions.

Originality/value

The article uses timely in-depth interview data on an issue of existential importance. The authors contribute a better understanding of how and why institutional investor capital is flowing into hydrocarbons at a time when calls to divest are louder than ever.

Details

Management Decision, vol. 62 no. 3
Type: Research Article
ISSN: 0025-1747

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Book part
Publication date: 21 June 2018

Markus Venzin, Matteo Vizzaccaro and Fabrizio Rutschmann

Abstract

Details

Making Mergers and Acquisitions Work
Type: Book
ISBN: 978-1-78743-350-2

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Book part
Publication date: 4 March 2021

Irina Surdu and Edith Ipsmiller

Going back into previously exited markets is a significant management risk. But, how are re-entry risks managed? By adding strategic reference point (SRP) rationales to the risk…

Abstract

Going back into previously exited markets is a significant management risk. But, how are re-entry risks managed? By adding strategic reference point (SRP) rationales to the risk management literature, this chapter examines re-entry after initial entry and divestment on a sample of 654 multinational enterprise (MNE) re-entrants. The authors move away from narrow risk management lenses according to which risks happen in isolation and theorize that MNEs simultaneously manage international risk by exploiting the trade-offs among external and internal sources of risk. The authors explain that, for re-entrants, exit may become the SRP for evaluating future strategic choices. The results suggest that re-entrants tend to manage re-entry risk by choosing partner-based modes that enable them to maintain strategic flexibility at re-entry. Surprisingly perhaps, market-specific experience acquired during the initial market foray does not provide strategic flexibility, in that highly experienced firms still experience risk trade-offs.

Details

The Multiple Dimensions of Institutional Complexity in International Business Research
Type: Book
ISBN: 978-1-80043-245-1

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Article
Publication date: 27 August 2019

Sharon Gotteiner, Marta Mas-Machuca and Frederic Marimon

Most mature organizations face a major decline in performance at some time during their existence. For more than three decades, it has been suggested that the management practices…

718

Abstract

Purpose

Most mature organizations face a major decline in performance at some time during their existence. For more than three decades, it has been suggested that the management practices that could cure a troubled company could have also kept it well. Inspired by this concept, this paper is proposing a preventive approach to early implementation of turnaround strategies as an alternative for otherwise traumatic rescue efforts, further along the downward spiral.

Design/methodology/approach

Corporate turnaround strategies and associated risks are integrated with a risk-based approach, along with a proactive decision-making process. The link between turnaround research, resource-based view, the sources of organizational decline, and the governance of organizational-decline-related risks – is explained.

Findings

The integrated model streamlines a preventive organizational process for considering the suitability of commonly used turnaround practices – for the non-crisis business routine of a mature company. By considering and adjusting the risks associated with such practices, it addresses risk aversion at the early stages of decline and determines the optimal sequence and timing of retrenchment and recovery activities. As such, it encourages mature companies to take actions for reducing their exposure to organizational decline. Accordingly, the model is named the “Anti-Aging” framework.

Research limitations/implications

Empirical testing of the suitability of turnaround strategies for non-crisis situations is proposed as a direction for future research.

Practical implications

The Anti-Aging framework opens an opportunity for the senior management of a mature organization to respond earlier to organizational decline and avoid the trauma associated with otherwise more challenging conditions, for the benefit of all stakeholders.

Originality/value

The Anti-Aging framework proposes an innovative way of bridging the gap between the benefits of early implementation of turnaround strategies, and major obstacles faced by willing, traditional management teams of mature organizations.

Details

Management Research Review, vol. 42 no. 11
Type: Research Article
ISSN: 2040-8269

Keywords

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