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Can Corporate Divestiture Activities Lead to Better Corporate Social Performance?

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  • Shih-chi (Sana) Chiu

    (University of Houston)

  • Azadeh Sabz

    (University of Houston)

Abstract

Prior research showed that corporate divestitures could help firms restore their strategic (versus financial) controls and long-term focus. This suggests that divestiture activities may have implications for firms’ commitment to corporate social responsibility (CSR) following divestitures. Drawing from the attention-based view of the firm, we examine this underexplored yet important research question. We propose that firms’ divestiture scale is positively associated with their commitment to post-divestiture CSR. However, this relationship is weakened among firms facing pre-restructuring financial decline and selling more related businesses, but strengthened among divesting firms with a new CEO. Using a longitudinal dataset of U.S. firms, we found support for most of our hypotheses. These findings suggest that corporate divestitures may offer a meaningful path to stakeholder value creation through better CSR performance.

Suggested Citation

  • Shih-chi (Sana) Chiu & Azadeh Sabz, 2022. "Can Corporate Divestiture Activities Lead to Better Corporate Social Performance?," Journal of Business Ethics, Springer, vol. 179(3), pages 849-866, September.
    • Handle: RePEc:kap:jbuset:v:179:y:2022:i:3:d:10.1007_s10551-021-04869-2
    DOI: 10.1007/s10551-021-04869-2
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