Abstract
As an important kind of strategic change responding to the dynamic environment, divestiture is crucial for firms but at the same time difficult. Prior studies mostly focused on economic, inertia, business relatedness, and agency antecedents, but paid less attention to managerial factors, especially top management. This paper tried to explain firm divestiture behavior from the CEO side using impression management perspectives. We argue that, CEOs under high information asymmetry and legitimacy-seeking pressure, such as newly appointed CEO, outside CEO and CEO not affiliated to a shareholder, would eager to impress the board and thus are more likely to make divestiture decisions. Using data from China publicly-listed firms and their affiliated units, we find strong support for the CEO tenure and shareholder affiliation argument. This study can contribute to divestiture research, agency theory and also governance research on Chinese firms.
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