Determinants of divestiture choice in South Africa
type: CreativeWork
description: This research report investigates the determinants of divestiture choice in South Africa. In addition, it examines how the determinants are influenced by the period studied. There are three periods of interest, being the full sample period, the prefinancial crisis period and the post financial crisis period. The determinants of divestiture choice have not been investigated from a South African perspective by prior studies. This report therefore contributes to the literature by exploring a new context. The South African context is unique because of differing laws and regulations as well as socio-economic factors specific to countries in developing markets. This report makes a further contribution by updating the literature on determinants of divestiture choice as post financial crisis data is included in the data set. The research is based on a sample of 102 divestiture transactions (78 spin-offs and 24 sell-offs) over the period 1998 to 2017. Logistic regression is used to ascertain the determinants of divestiture choice using pre-divestiture data of the parent company. The results show that financial performance as measured by return on equity (ROE) and liquidity as measured by the current ratio are significant determinants of divestiture choice over the full sample period (1998 to 2017). The higher the firm’s financial performance, the higher the likelihood of divestiture through spin-off. Contrary to expectation, it was found that the higher the liquidity of the firm, the higher the likelihood of divestiture through sell-off. Financial distress, director ownership, Broad Based Black Economic Empowerment (BBBEE) and effective taxation rates are not found to be significant factors in determining divestiture choice over the entire period of study. Financial performance is found to be a significant determinant of divestiture choice over the pre-financial crisis period (1998 to 2006). The results for this period show that the higher the firm’s financial performance, t…
abstract: This research report investigates the determinants of divestiture choice in South Africa. In addition, it examines how the determinants are influenced by the period studied. There are three periods of interest, being the full sample period, the prefinancial crisis period and the post financial crisis period. The determinants of divestiture choice have not been investigated from a South African perspective by prior studies. This report therefore contributes to the literature by exploring a new context. The South African context is unique because of differing laws and regulations as well as socio-economic factors specific to countries in developing markets. This report makes a further contribution by updating the literature on determinants of divestiture choice as post financial crisis data is included in the data set. The research is based on a sample of 102 divestiture transactions (78 spin-offs and 24 sell-offs) over the period 1998 to 2017. Logistic regression is used to ascertain the determinants of divestiture choice using pre-divestiture data of the parent company. The results show that financial performance as measured by return on equity (ROE) and liquidity as measured by the current ratio are significant determinants of divestiture choice over the full sample period (1998 to 2017). The higher the firm’s financial performance, the higher the likelihood of divestiture through spin-off. Contrary to expectation, it was found that the higher the liquidity of the firm, the higher the likelihood of divestiture through sell-off. Financial distress, director ownership, Broad Based Black Economic Empowerment (BBBEE) and effective taxation rates are not found to be significant factors in determining divestiture choice over the entire period of study. Financial performance is found to be a significant determinant of divestiture choice over the pre-financial crisis period (1998 to 2006). The results for this period show that the higher the firm’s financial performance, t…
author: Siame, Davy
keywords: Taxation
date published: 2019
date modified: 2026-07-22T22:23:10Z
provider: University of Cape Town
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: Department of Finance and Tax

PropertyValue
property ID: Handle
value: http://hdl.handle.net/11427/31029