Managers in the Familiar and Their Divestment Decisions
- Topics:
- Divestment
- Source:
- Florida State University
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Overview: In this paper, the author argues that CEOs' sense of familiarity with segments has an impact on their divestiture decisions. CEOs may be more confident on segments they are familiar with and thus may overestimate the future returns and underestimate the risk of these segments. Based on these characteristics of familiarity, author hypothesize that managers are less likely to divest segments they are familiar with relative to segments they are unfamiliar with. Author classifies CEOs as being familiar with a segment based on their working experience related to the segment. Consistent with the hypothesis, the empirical results indicate that CEOs are more reluctant to partially divest segments they are familiar with.
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Format: PDF | Size: 114KB | Date: Oct 2005 | Pages: 32
