Can Corporate Divestiture Activities Lead to Better Corporate Social Performance?

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.