Divestment constitutes an important method of corporate restructuring. Despite this fact, the banking literature on divestment is very limited. In this text, we try to remediate partially to the shortcomings of the existing literature by examining empirically the role of external factors. Using a large sample of 313 transactions, we have established that parent companies originate from countries with relatively high accumulated wealth, slow GDP growth, stable macroeconomic situation and dominant bank intermediation in financial system. The acquirers in turn come from poorer countries with faster economic growth and relatively more market-oriented financial systems. Those results broadly conform with the predictions of three hypotheses formulated in the text, namely the weak performance hypothesis, the corporate governance hypothesis and the rebalancing hypothesis.
IntroductionDivestments in banking mainly take the form of the subsidiary sell-offs. They constitute, as Brauer (2006) notices, the element of corporate portfolio restructuring alongside dissolutions and consolidation activity.They have far-reaching consequences. Divestments affect industry structures and competition, firm strategy and performance, employees' motivation and commitment. The literature on divestments is unbalanced. The studies on non-financial firms are numerous, whereas those on financial intermediaries are very rare. This is why we have undertaken a long-term research project concerning divestments in banking. This article presents preliminary evidence on the role played in this process by external factors. By the external factors, we mean macroeconomic variables and variables characterizing financial system. The reminder of the article is organized as follows.Section 1 introduces the literature review. Section 2 describes the dataset and our theoretical expectations. In section 3, we present the empirical results. The last section presents the conclusion.
Literature Review
Banking literature.As we have already mentioned, the banking literaturedealing with the problem of divestment is very limited . We are aware of only three studies in this field. Leung et al. (2008)
Corporate finance literature.The researchers in the field of corporate finance investigated three key issues related to divestments: motives for divestment decisions, market reactions to the announcements of divestments and consequences of divestment transactions. Excellent and extensive reviews of those strands of literature are provided by Brauer (2006), Decher & Mellewight (2007a, 2007b. Therefore, we will restrain our analysis to the selected and representative works.
Motives.As far as motives for divestments are concerned, Denis et al. (1997)