CORPORATE DIVESTITURE INTENSITY IN RESTRUCTURING FIRMS - EFFECTS OF GOVERNANCE, STRATEGY, AND PERFORMANCE

Both inadequate governance and inappropriate strategy have been propos ed as antecedents of the divestment activity of restructuring firms in the 1980s. We combined both views in a structural equation model in w hich divestment intensity is directly related to firm performance and strategy, which are in turn preceded by weak governance. Some supporti ve results indicate that blockholder equity, a governance antecedent, and relative product diversification (strategy) have important indirec t effects on divestment activity and that relative product diversifica tion and relative debt have important direct effects. Unpredicted find ings concerning board outsider equity and components of divestment int ensity emerged. Also, market performance mediates the relationship bet ween accounting performance and divestiture intensity.