Title: Voluntary firm restructuring: why do firms sell or liquidate their subsidiaries?
Authors: Praet, Alain # ×
Editors: Villamil, Anne P
Issue Date: 2011
Publisher: Springer
Series Title: Annals of Finance vol:7 issue:4 pages:449-476
Abstract: This paper examines why companies decide to divest a subsidiary in a corporate environment characterised by concentrated ownership, using a unique dataset of non-listed Belgian subsidiaries. The results of the binomial logit analyses are consistent with the idea that management will intervene in order to improve the controlling firm’s focus or when subsidiary performance imposes a burden on the group’s financial situation. Especially when blockholders hold more than 75% of the shares, these motives drive the divestiture decision. At lower levels of ownership concentration, these hypotheses cannot explain the higher divestiture likelihood, which supports the agency hypothesis. Once the divestment decision has been taken, the choice has to be made between a sale and liquidation. The logit analysis reveals that although selling a subsidiary seems the preferred option, liquidation is likely when the subsidiary is small, active in a sector with few competitors and when financial distress is eminent.
ISSN: 1614-2446
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Faculty of Economics and Business (FEB) - miscellaneous
Research Centre for Quantitative Business Processes, Campus Brussels (-)
× corresponding author
# (joint) last author

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