This study examines the influence of firms’ internal control weakness (ICW) reported under the Sarbanes-Oxley Act (SOX) on their subsequent divestiture decisions and the performance of these decisions. We argue that following ICW disclosure, firms are inclined to pursue corporate divestitures because such divestitures can reduce organizational complexity and help remedy firms’ ICW. We also propose that the positive influence of ICW disclosure on divestitures is stronger when a firm has recently appointed a CEO but weaker when there is a higher prevalence of ICW within the industry. Furthermore, we investigate the dual performance implications of divestitures following ICW disclosure. Although these divestitures, compared to divestitures not following ICW disclosure, are associated with higher stock market performance, they are also associated with slower sales growth for firms’ core businesses. We present empirical evidence that supports our arguments using a sample of S&P 1500 firms from 2003 to 2020. This study advances corporate strategy research by highlighting the role of ICW in shaping corporate divestiture decisions and documenting the multifaceted performance implications of such divestitures.

中文翻译：

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内部控制缺陷与公司剥离


本研究探讨了根据《萨班斯-奥克斯利法案》(SOX) 报告的公司内部控制缺陷 (ICW) 对后续剥离决策以及这些决策绩效的影响。我们认为，在 ICW 披露之后，企业倾向于寻求企业资产剥离，因为此类资产剥离可以降低组织的复杂性并有助于纠正企业的 ICW。我们还认为，当公司最近任命了首席执行官时，ICW 披露对资产剥离的积极影响更强，但当 ICW 在行业内更为普遍时，ICW 披露的积极影响更弱。此外，我们还研究了 ICW 披露后资产剥离对绩效的双重影响。尽管与不遵循 ICW 披露的剥离相比，这些剥离与较高的股市表现相关，但它们也与公司核心业务的销售增长放缓相关。我们使用 2003 年至 2020 年标准普尔 1500 家公司样本提供了支持我们论点的实证证据。这项研究通过强调 ICW 在制定公司剥离决策中的作用并记录此类剥离对绩效的多方面影响，推进了公司战略研究。