Examining Inertia Against Divesting in Management Strategy

Students

2020
Wharton

Faculty

Associate Professor of Management

Project Summary

I conducted research on corporate decision-making with Professor Emilie Feldman in the Management Department of The Wharton School. The research aims to better understand how inertia against divesting business units in corporate culture can impact a firm’s operational and financial performance. By examining over 1500 divestiture deals across various industries and markets, I was able to aggregate data that enabled us to quantify said inertia, as well as track the impact of various levels of inertia on firm performance. The data also includes various other environmental conditions that need to be accounted and controlled for in order to isolate the impact of inertia on a firm, such as overall industry performance, and recent management changes. To gather the data, I used various financial news media outlets such as The Wall Street Journal, The Economist, and Bloomberg, as well as other mainstream media publications like The New York Times, and The Washington Post. Through these sources, I extracted the date the specific divestiture deal was first mentioned, as well as understood the media's viewpoint of the divestiture. By then examining the company's press release preceding the disclosure of the divestiture, I was able to compare the viewpoints and look for underlying messages or themes. I additionally aggregated company-level information by reading the 10-Ks, annual company report published on the Securities and Exchange Commission website, of the divesting companies to better understand the financial and operational context of the divestitures. The next steps in the research process will be to analyze the dataset through software such as Stata to extract findings that will either support or dispute our hypotheses regarding the impact of managements' decision making processes, and the subsequent inertia against divesting on firm and unit performance.

Examining Inertia Against Divesting in Management Strategy