Abstract
This study extends research on foreign divestment by considering it within the broader context of corporate restructuring, exploring how MNE M&As affect divestment of foreign affiliates. Drawing from agency and organizational theories, I claim that the postmerger integration process reduces managerial and organizational barriers to foreign divestment and thereby increases the likelihood of foreign divestment. I confirm this prediction using data from a sample of foreign affiliates in Korea during 2006–2019. The positive relationship between MNE M&As and foreign divestment is stronger for majority-owned foreign affiliates, for which managers have made more commitments and therefore are generally less likely to make a withdrawal decision. In contrast, the relationship is weaker when a focal affiliate is the parent MNE’s sole affiliate in a host country.
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