Zicklin School of Business of Baruch College, City University of New York, USA

I investigate the impact of firm environmental performance on divestitures. Building on the behavioral theory of the firm, I argue that failure to meet environmental performance aspirations— even if considered secondary to financial performance aspirations—triggers firms to divest assets. I further posit that the nature of the assets—environmentally dirtier or cleaner relative to the other assets in the portfolio—that firms choose to divest is contingent on whether firms meet their financial aspirations. Firms that fail to meet financial aspirations in addition to their environmental aspirations are more likely to divest cleaner than dirtier assets in hopes of charging a full price in the asset sale, thereby helping them improve their financial position. In contrast, firms that fail to meet environmental aspirations but satisfy financial aspirations are more likely to divest dirtier than cleaner assets, as they can be more strategic about renewing their portfolio and thus may retain those assets that help them effectively address their current or future environmental liabilities. This study illuminates the conditions under which firms undertake a strategic change—such as divestitures—in response to environmental performance relative to their aspirations.

Keywords: environmental performance, divestitures, behavioral theory, performance feedback,
multiple goals

Biography

Junghoon Park is a Ph.D. candidate in Management with a concentration in Strategy and
Corporate Sustainability at the Zicklin School of Business of Baruch College, City University of
New York. He is also a Graduate Center of the City University of New York Fellow. His research
expertise is in global sustainability strategy, stimulated by an interest in how firm strategies address intractable grand challenges. His research agenda aims to build a framework that helps businesses identify and adopt strategies that meet their needs while mitigating negative externalities and increasing positive ones to improve sustainability worldwide.