Types of aspirations and divestment decisions following underperformance

This study draws on attribution theory to examine how underperformance influences divestment activity. We argue that the impact of performance below aspirations on divestment varies depending on the type of aspiration used as the comparison standard. Analyzing divestment deals completed by U.S. manufacturing firms between 2010 and 2020, we find that underperformance increases divestment activity, with the effect being stronger when firms fall short of social aspirations than when they fall short of historical aspirations. Furthermore, we find that external market uncertainty weakens the relationship between underperformance and divestment, with a more pronounced mitigating effect when performance falls below historical rather than social aspirations.