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To study divestitures, it is first important to identify the entities that are involved in those deals.
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We studied divestiture effects by systematically varying the proportions of two industrial owners with concurrent changes in the proportion of non-industrial private forest owners (NIPF).
In sum, there are two useful heuristics to follow when choosing the unit of analysis for a study about divestitures.
Emilie Feldman, an assistant professor of management at Wharton who has done a series of studies of divestitures, told me, "It isn't just the stock price.
We then discuss how to design and implement empirical studies on divestitures.
Research studies about divestitures draw on three key constructs: the entities involved in the divestiture, the characteristics of the divestiture, and the outcomes of the divestiture.
Since many studies of divestitures seek to measure the outcomes of these deals for one or more of the entities that are involved in them, it is useful to identify or calculate certain performance metrics.
In addressing the two research questions that are typically asked in studies about divestitures (what motivates firms to undertake divestitures, and what are the performance consequences of these deals?), the two following models are generally employed: (1) Divestiture it = θY it + δ i + ζ t + η it (2) Performance it = βDivestiture it + γX it + δ i + ζ t + ε it .
One is that it underscores the need for scholars who are conducting empirical studies of divestitures to use statistical methodologies that account for the effects of non-random selection in the firms that choose to undertake divestitures (or certain types of divestitures).
Most studies of divestitures, whether they appear in the finance or strategy literatures, explore either the motivations for or the implications of divestitures that managers choose to undertake, rather than divestitures that managers are mandated to undertake by some external entity such as a regulatory body.
Having presented the general types of research questions that empirical studies about divestitures can usefully set out to answer, it is next helpful to describe the settings in which these questions can be addressed, as well as the operationalization of key constructs.
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