Corporate Divestitures and Family Control

Abstract

This paper investigates the propensity of family firms to undertake corporate divestitures, as well as the performance consequences of these transactions. Using a proprietary dataset consisting of detailed information on the family control and divestiture activity of family firms between 1994 and 2010, we find that family firms are less likely than their non-family counterparts to under-take divestitures, especially when they are managed by family- rather than non-family CEOs. We also establish that the divestitures undertaken by family firms are associated with higher firm value, though this does not appear to be contingent on the familial relationships of the CEO of the company.