SIZE AND RELATEDNESS OF UNITS SOLD - AN AGENCY THEORY AND RESOURCE-BASED PERSPECTIVE

This study tests the effects of ownership concentration, outside director equity holdings, and corporate strategy on, and the performance implications of, the size and relatedness of units sold by parent firms. The study is based on a model that integrates agency and resource-based theories, and a sample of sell-offs by 112 Fortune 500 firms. Ownership concentration is found to be associated positively with the sale of unrelated and small units. This relationship is strengthened when outside director equity is high. In addition, the effects of corporate strategy types on the characteristics of units sold depend on ownership concentration and outside director equity. Finally, post-sell-off performance of the parent firm is associated negatively with the relatedness of the unit sold. These results suggest that the type of unit sold depends on the type of economic benefit sought by the parent firm.