Asset divestitures and corporate operational returns

An agency theory perspective on Malaysian public-listed companies

Janice Y M Lee, Fauzias Mat Nor, Norazlan Alias

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

Divestitures of property, plant and equipment (PPE) assets are a common form of corporate restructuring. However, divesting companies do not necessarily attain improved post-divestiture shareholder wealth. Studies show company characteristics and use of divestiture proceeds may influence divestiture outcomes. This paper attempts to determine these divesting company characteristics and use of proceeds associated with improved shareholder wealth based on the Agency Theory. A sample of Malaysian public-listed companies that divested assets within 2002-2005 is used. Logistic regression segregates these companies based on their industry-adjusted operational returns. Companies that improve post-divestiture operational performance require urgent pay out motives to divest. Companies with deteriorated post-divestiture performance divest without urgent pay out motive and tend to retain proceeds. This suggests agency problem of managerial discretion in asset divestitures. In asset selection, divestitures of larger and more inefficient assets were found associated with improved company performance. Malaysian companies prefer divesting assets related to their core businesses indicating a diversified company structure is more beneficial than a focused structure in developing countries. © 2013

Original languageEnglish
Pages (from-to)347-360
Number of pages14
JournalInternational Journal of Strategic Property Management
Volume17
Issue number4
DOIs
Publication statusPublished - 2013

Fingerprint

Divestitures
Listed companies
Assets
Agency theory
Divestiture
Shareholder wealth
Managerial discretion
Corporate restructuring
Business performance
Industry
Agency problems
Logistic regression
Developing countries
Company performance

Keywords

  • Agency problem
  • Asset divestitures
  • Divestiture proceeds
  • Operational returns

ASJC Scopus subject areas

  • Strategy and Management

Cite this

Asset divestitures and corporate operational returns : An agency theory perspective on Malaysian public-listed companies. / Lee, Janice Y M; Nor, Fauzias Mat; Alias, Norazlan.

In: International Journal of Strategic Property Management, Vol. 17, No. 4, 2013, p. 347-360.

Research output: Contribution to journalArticle

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