Abstract

It is well-recognized in the literature that performance and external environment are strong determinants of divestitures. This paper provides a theoretical justification in support of the thesis that the role of performance in determining divestitures declines during a market crash. The empirical analysis of the performance of over 19,000 U.S. mutual funds in the 2000–2014 period strongly supports the existence of the negative exit-performance relationship outside the period of the global financial crisis 2008, and shows that this relationship did not hold during the crisis. Such distortion to the role of performance in divestiture decision-making shows yet another impact global financial crisis 2008 has had on businesses and markets, and raises questions about ethical behavior of the asset management industry.
LanguageEnglish
Number of pages28
StatusPublished - Jan 2018

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Mutual funds
Financial crisis
Exit
Global financial crisis
Divestitures
Industry
Ethical behavior
Empirical analysis
Asset management
Decision making
Market crash
Justification
Divestiture
External environment

Cite this

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abstract = "It is well-recognized in the literature that performance and external environment are strong determinants of divestitures. This paper provides a theoretical justification in support of the thesis that the role of performance in determining divestitures declines during a market crash. The empirical analysis of the performance of over 19,000 U.S. mutual funds in the 2000–2014 period strongly supports the existence of the negative exit-performance relationship outside the period of the global financial crisis 2008, and shows that this relationship did not hold during the crisis. Such distortion to the role of performance in divestiture decision-making shows yet another impact global financial crisis 2008 has had on businesses and markets, and raises questions about ethical behavior of the asset management industry.",
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