IMPACT OF CORPORATE GOVERNANCE AND FIRM CHARACTERISTICS ON SHORT-TERM MARKET REACTIONS TO DIVESTITURE ANNOUNCEMENTS: EVIDENCE FROM INDIA.

DOI: https://doie.org/10.65985/APER.2026273409

Authors:

Mr. Arjun Rana, Dr. Meena Sharma

Keywords:

Divestitures; Corporate governance; Board independence; Audit committee independence; CEO duality; Firm characteristics; Event study

Abstract:

This study examines the short‐term market reactions to 203 divestiture announcements by Indian listed firms (2010–2023), incorporating corporate governance and firm‐specific determinants. Using a multi-window event-study methodology, the results reveal significant positive cumulative abnormal returns concentrated in narrow windows around the announcement date, with gains dissipating thereafter. Regression analysis indicates that profitability (ROA) consistently drives positive returns, while non-focus-increasing divestitures and occasional CEO duality effects challenge conventional agency theory expectations. Governance attributes such as board and audit committee independence show limited influence. The findings highlight the context‐specific interplay between strategy, performance, and governance in shaping shareholder wealth effects in emerging markets.

PDF