Iowa State University Capstones, Theses and Graduate Theses and Dissertations Dissertations 2019 Strategic restructuring: Study of divestitures and acquisitions Sina Amiri Iowa State University Follow this and additional works at: https://lib.dr.iastate.edu/etd Part of the Business Administration, Management, and Operations Commons, and the Management Sciences and Quantitative Methods Commons Recommended Citation Amiri, Sina, "Strategic restructuring: Study of divestitures and acquisitions" (2019). Graduate Theses and Dissertations. 17388. https://lib.dr.iastate.edu/etd/17388 This Dissertation is brought to you for free and open access by the Iowa State University Capstones, Theses and Dissertations at Iowa State University Digital Repository. It has been accepted for inclusion in Graduate Theses and Dissertations by an authorized administrator of Iowa State University Digital Repository. For more information, please contact [email protected]. Strategic restructuring: Study of divestitures and acquisitions by Sina Amiri A dissertation submitted to the graduate faculty in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Major: Business and Technology (Management) Program of Study Committee: Samuel M. DeMarie, Co-major Professor David R. King, Co-major Professor Bradly Shrader James Brown Amy Froelich The student author, whose presentation of the scholarship herein was approved by the program of study committee, is solely responsible for the content of this dissertation. The Graduate College will ensure this dissertation is globally accessible and will not permit alterations after a degree is conferred. Iowa State University Ames, Iowa 2019 Copyright © Sina Amiri, 2019. All rights reserved. ii DEDICATION To my best friend, Sani. To my loveliest sister, Sayeh. iii TABLE OF CONTENTS Page LIST OF FIGURES ............................................................................................................ v LIST OF TABLES ............................................................................................................. vi NOMENCLATURE ......................................................................................................... vii ACKNOWLEDGMENTS ............................................................................................... viii ABSTRACT ........................................................................................................................ x INTRODUCTION ....................................................................................... 1 1.1 Types of Divestiture ................................................................................................ 1 1.2 Why Important ......................................................................................................... 2 1.3 Research Questions .................................................................................................. 2 1.4 Overview of the Academic Papers .......................................................................... 3 A REVIEW OF CORPORATE DIVESTMENT ANTECEDENTS, PROCESSES AND OUTCOMES ...................................................................................... 5 Abstract .......................................................................................................................... 5 2.1 Introduction ............................................................................................................. 5 2.2 Method ..................................................................................................................... 7 2.3 Literature Review .................................................................................................... 8 2.3.1 Antecedents ..................................................................................................... 8 2.3.1.1 Environment ............................................................................................ 9 2.3.1.2 Firm governance ................................................................................... 11 2.3.1.3 Firm strategy ......................................................................................... 13 2.3.1.5 Firm resources ....................................................................................... 15 2.3.1.6 Firm performance .................................................................................. 16 2.3.1.7 Unit (divested) ....................................................................................... 17 2.3.2 Divestiture Processes ..................................................................................... 20 2.3.2.1 Decision making process ...................................................................... 21 2.3.2.2 Mode of divestiture ............................................................................... 22 2.3.2.3 Implementation process ........................................................................ 23 2.3.3 Outcomes ....................................................................................................... 25 2.3.3.1 Market performance .............................................................................. 26 2.3.3.1.1 Agency theory ............................................................................... 27 2.3.3.1.2 Institutional theory ........................................................................ 28 2.3.3.1.3 Behavioral theory of the firm........................................................ 28 2.3.3.1.4 Learning theory ............................................................................. 29 2.3.3.1.5 RBV .............................................................................................. 30 2.3.3.1.6 TCE ............................................................................................... 31 2.3.3.1.7 RDT .............................................................................................. 31 iv 2.3.3.2 Accounting performance ....................................................................... 32 2.3.3.2.1 Agency theory ............................................................................... 32 2.3.3.2.2 Learning theory ............................................................................. 33 2.3.3.2.3 RBV .............................................................................................. 34 2.3.3.2.4 Behavioral theory of the firm........................................................ 34 2.3.3.3 Growth .................................................................................................. 35 2.3.3.4 Innovation ............................................................................................. 36 2.3.3.5 Productivity ........................................................................................... 37 2.3.3.6 Acquisition performance ....................................................................... 38 2.3.3.7 CEO Incentive Alignment ..................................................................... 38 2.4 Discussion .............................................................................................................. 39 2.4.1 Research Implications ................................................................................... 39 2.4.2 Managerial Implications ................................................................................ 42 2.4.3 Limitations and Future Research ................................................................... 43 2.5 References ............................................................................................................. 43 PORTFOLIO THEORY: CORPORATE RESTRUCTURING AND THE DIVESTMENT OF PRIOR ACQUISITIONS ........................................................ 54 Abstract ........................................................................................................................ 54 3.1 Introduction ........................................................................................................... 54 3.2 Theory and Hypotheses ......................................................................................... 57 3.2.1 Change in Performance Variation ................................................................. 58 3.2.2 Relatedness .................................................................................................... 59 3.2.3 Expected Firm Performance .......................................................................... 60 3.3 Data and Methods .................................................................................................. 61 3.3.1 Sample ........................................................................................................... 61 3.3.2 Dependent Variables ..................................................................................... 63 3.3.3 Independent Variables ................................................................................... 64 3.3.4 Control Variables .......................................................................................... 65 3.4 Results ................................................................................................................... 66 3.5 Discussion .............................................................................................................. 70 3.5.1 Research Implications ................................................................................... 71 3.5.2 Managerial Implications ...............................................................................