Voluntary divestitures and corporate life-cycle: some empirical evidence

Abstract

The life-cycle concept is utilized to examine the voluntary divestiture phenomenon and is sucessful in seperating a sample of 145 divesting firms into four life-cycle groups through the use of cluster analysis preceded by factor analysis. The resulting groups, late expansion/early maturity, regenerating maturity, late maturity/early decline, and decline, differ from one another in terms of basic financial characteristics just before the divestiture event. They also differ in terms of the changes in financial characteristics experienced around the divestiture event by these divesting firms relative to their matched control firms. Support is found for most of the divestiture hypotheses suggested by life-cycle theory using paired-sample nonparametric tests and t-tests.

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