Frontiers in Business, Economics and Management 
ISSN: 2766-824X | Vol. 10, No. 3, 2023 

 

153 

Divestiture,	Managerial	Ability	and	Corporate	Financial	
Flexibility	
Jiarui Cui, Yan Zhao, Qian Li 

Department of accounting, Anhui University of Finance and Economics, Bengbu, 233030, China 

 

Abstract: Divestment is an effective way to allocate resources in the capital market. In recent years, the frequency and scale 
of divestment of listed companies in China continue to increase. Based on A sample of A-share listed companies in Shanghai 
and Shenzhen from 2011 to 2020, this paper examines the relationship between divestment and corporate financial flexibility 
from the perspective of corporate governance, and examines the moderating effect of managerial ability on the relationship. The 
results show that divestment is significantly positively correlated with corporate financial flexibility, and the management ability 
can promote its positive effect. Further research finds that financial constraints play a significant intermediary role in the impact 
of divestment on financial flexibility, that is, divestment can promote the improvement of financial flexibility by alleviating 
financial constraints. 

Keywords: Divestment, Financial constraints, Financial flexibility, Managerial ability. 
 

1. Introduction 
Divestment is an effective way for enterprises to adjust 

industrial structure and optimize asset quality. It is also an 
important way for enterprises to operate contractionary 
capital. At present, China is faced with the dual dilemmas 
caused by the new round of scientific and technological 
revolution and industrial transformation, such as the 
interruption of industrial chain, the interruption of supply of 
key products, the lack of core technology of domestic 
enterprises, and the serious competition of industrial chain 
homogeneity. It is an issue that the Chinese government and 
enterprises must consider together to build a more risk-
resistant supply chain. According to CSMAR database, from 
2011 to 2020, the frequency of divestment of Chinese A-share 
listed companies soared from 1607 to 6219, and the annual 
transaction amount rose from 128.57 billion yuan to 1020.61 
billion yuan. In addition, the meaning of divestment itself has 
also changed. Previously, only enterprises with poor 
performance would use divestment to improve their 
performance; Tang and Li (2016) [1] found that now 
divestment has become a new starting point for the 
transformation and upgrading of Chinese enterprises. 

Most of the existing studies on divestment take enterprises 
in Europe and the United States as research samples; The 
research content mainly focuses on the motivation and 
economic consequences of divestment. Guo et al. (2020) [2] 
generally believe that divestment is not only a strategic 
adjustment based on long-term development. Yan and Li 
(2014)[3] believe that divestment is also a short-term 
behavior of real earnings management. Although the 
divestment scale of Chinese enterprises is expanding rapidly, 
the research on Chinese enterprises' divestment is not very 
abundant. The research in China mainly focuses on the impact 
of divestment on corporate financial performance, and there 
are also a few studies on the perspective of earnings 
management around divestment, such as Xu (2012) [4], and 
Xue et al. (2022) [5] regarded the divestment as a corporate 
strategy. In fact, China is a very good scene to study 
divestment and corporate strategic decision making. 
Therefore, it is important to explore the strategic motivations 

of divestment and broaden the research perspective of its 
economic consequences in the Chinese context. 

Xue et al. (2021) [6] pointed that although Chinese 
enterprises have been actively participating in restructuring, 
divestment is still a relatively little-studied field. Enterprises 
in developed countries have widely used divestment in asset 
restructuring, and have a relatively complete theoretical 
system and framework. However, the economic theories of 
western developed countries on divestment motivation and 
positive value effect may not be equally applicable to 
emerging economies. The possible contributions of this paper 
are as follows: first, from the perspective of corporate 
governance, this paper deeply analyzes the impact of 
divestment on financial flexibility, and deepen the research on 
the economic consequences of divestment. Second, we 
incorporate managerial ability and corporate financing 
constraints into the study of divestment, and examine their 
moderating and mediating effects respectively, which 
expands the research scope of micro firm behavior and 
provides theoretical support for improving corporate financial 
flexibility. 

2. Theoretical Analysis and Research 
Hypotheses 

2.1. Divestment and Corporate Financial 
Flexibility 

Enterprise financing theory refers to the financial activities 
of raising and concentrating capital economically and 
effectively through certain channels and financial markets 
and using certain methods to meet the needs of production and 
operation, foreign investment and capital structure adjustment. 
Divestiture of assets can solve the financial crisis of 
enterprises by revitalizing idle assets and taking cash. For 
those companies with excessive financial leverage or poor 
operating performance, asset sales are a relatively cheap 
source of financing if debt and equity financing is expensive. 
Zhang and Wang (2013) [7] found that for companies in 
financial distress, divestment is an effective way to avoid 
bankruptcy. In order to avoid underinvestment caused by debt 
overhang, companies can sell assets to reduce leverage ratio, 



 

154 

and the cash obtained from asset divestment can effectively 
ease the financing constraints of enterprises. Zhang and Chen 
(2022) [8] found that When the cost of external financing is 
high, divestment can help enterprises recover funds and 
optimize the allocation of resources. Therefore, Li et al.  
(2019) [9] support the idea that divestment is an important 
source of enterprise R&D investment. 

Guo and Guo (2020) [10] pointed that both the enterprises 
with poor performance base and the enterprises with good 
performance are usually inclined to partially divest their 
assets to maintain the stable and sustainable operation of the 
enterprises. Enterprises can often take the initiative to use 
their resources and technological advantages to 
systematically and accurately evaluate the operating situation, 
and choose to divest businesses and resources that are no 
longer suitable for the overall development plan of the 
enterprise and are not profitable. In addition, companies with 
a good performance foundation, even if they have the 
motivation to achieve organizational change through 
divestitures, are likely to implement low to medium risk 
divestitures to avoid possible damage to the business. As a 
result, well-performing companies often use divestitures as a 
means of fine-tuning their management and financial 
resources, while avoiding full divestitures. In addition, 
enterprises with poor performance face the urgent need to 
raise funds, and financing constraints prevent them from 
raising funds in the capital market. Therefore, it is of little 
significance to divest some businesses with small scale and 
limited financial returns, which does not meet the current 
urgent needs, but needs to divest important assets and even 
core assets on a large scale. Thus access to a large amount of 
financial resources to avoid the risk of bankruptcy. But at the 
same time, there is also a high risk of major disruption and 
significant changes in corporate boundaries due to large-scale 
divestments of important assets. In addition, such divestments 
carry significant opportunity costs and risk the elimination of 
valuable resources that may provide value in the future, either 
to meet current use or as part of an ongoing restructuring. 

Based on the above analysis, this paper puts forward 
hypothesis 1: 

H1: Divestment is positively correlated with corporate 
financial flexibility. 

2.2. Divestment, Managerial Ability and 
Corporate Financial Flexibility 

According to the transaction cost theory, the marginal 
benefits of enterprise diversification tend to decrease as 
enterprises move away from the core business, but some 
enterprises will still diversify due to some reasons, such as 
managers' pursuit of their own interests, market fluctuations, 
and environmental changes such as the loss of information 
and control. Therefore, if over-diversified companies return 
to their main business, performance will improve. 

Agency theory holds that divestiture is a remedy for the 
problems caused by inadequate corporate governance. Proxy 
conflicts between a company's management and shareholders 
may cause management to be reluctant to divest certain assets, 
thereby locking up significant shareholder value within the 
company and creating a discrepancy between the actual and 
potential value of the company's stock. Companies that do 
divestitures generally have fewer agency problems and are 
seen as correcting ineffective internal and external control 
mechanisms. The occurrence of divestitures is conducive to 
improving corporate governance, and companies with agency 

problems will release value for shareholders when reversing 
these harmful behaviors. According to the principal-agent 
theory, the contractual relationship will be formed after the 
shareholders give the decision-making right to the managers. 
The managers will always consider the operating cost when 
they divest the company's assets, because reducing the 
operating cost is an important means to improve the financial 
flexibility of the enterprise. The loss assets will be stripped in 
exchange for profits, so that the enterprise is updated 
internally, and the bad assets of the enterprise will be stripped 
to "slim down" for the enterprise, so that the immediate effect 
gives the enterprise a rebirth opportunity, to seize the 
opportunity to boost the confidence of the enterprise 
development in the short term, which will inevitably increase 
the planning of long-term performance, and will inevitably 
improve its financial flexibility. 

Based on the above analysis, this paper puts forward 
hypothesis 2: 

H2: When other conditions are given, managerial ability 
will promote the relationship between divestment and 
financial flexibility. 

3. Research Design 

3.1. Sample Selection and Data Sources 
This paper takes A-share listed companies in Shenzhen and 

Shanghai from 2011 to 2020 as the research sample, and the 
original data are from CSMAR database. Based on previous 
studies, samples are further screened according to the 
following criteria: (1) ST, ST*, financial and insurance listed 
companies are excluded; (2) only the listed companies whose 
trading status is the seller are examined; (3) excluding the 
samples of related party transactions, unsuccessful 
transactions and major asset reorganization; (4) Excluding the 
data with missing divestment data and divestment amount less 
than RMB 5 million; (5) The total amount of multiple 
divestments in the current year shall be the total amount of 
divestments in the current year; (6) Reduce the interference 
of outliers, winsorized all variables by 1% and 99%, and 
finally obtained 3087 data. 

3.2. Variable Measurement 
3.2.1. Explained Variable: Financial Flexibility (FF) 

Enterprises mainly obtain financial flexibility through 
three ways, namely, holding cash, maintaining debt financing 
ability and equity financing ability, so corporate financial 
flexibility can be generally divided into three types: cash 
flexibility, debt financing flexibility and equity financing 
flexibility. Combined with China's institutional background, 
this paper draws on Zeng et al. (2013) [11] to measure 
financial flexibility as follows: financial flexibility = cash 
flexibility + debt financing flexibility, where cash flexibility 
= corporate cash ratio - industry cash ratio, debt financing 
flexibility =Max (0, industry average debt ratio - corporate 
debt ratio). The reason why this paper does not consider the 
flexibility of equity financing is that under the institutional 
background of China, the qualification, time and quantity of 
equity refinancing of listed companies are strictly controlled 
by China Securities Regulatory Commission, and few 
companies have the right to decide when and how much 
equity securities to issue, so few companies have the 
flexibility of equity financing. 

3.2.2. Explanatory variable: Divestment of Assets (Div) 
Referring to the method of Guo and Wang (2022) [12] , this 



 

155 

paper measures the divestment scale by dividing the amount 
of divestment transactions in each year by the total assets at 
the end of the period. 

3.2.3. Control Variables 
Referring to previous studies, this paper controls common 

factors such as enterprise size, financial leverage, cash flow, 
board size, listing age and ownership concentration. In 
addition, year and industry fixed effects are also controlled. 

3.2.4. Mediating Variable: Financing Constraints (FC) 
The construction process of FC index model is as follows: 

(1) The three variables of company size, company age and 
cash dividend payout rate are standardized by year. ② 
According to the mean value of standardized variables, the 
listed companies are ranked (ascending order), and the upper 
and lower tertiles are used as the cut-off points of financial 
constraints to determine the dummy variable of financial 
constraints (QUFC). Among them, the listed companies with 
more than 66.7% quantile are defined as low financial 
constraints group, QUFC=0; the listed companies with less 
than /33.3% quantile are defined as high financial constraints 
group, QUFC=1. ③ logit regression is carried out according 
to Formula (1), and the fitting value is the FC index of 
financial constraints. 

𝑃 𝑄𝑈𝐹𝐶 𝐼 𝑍𝐹𝐶 ,
𝑒 ，

𝐼 𝑒 ，
 1  

 

𝑍𝐹𝐶 , 𝛽 𝛽 𝑆𝑖𝑧𝑒 , 𝛽 𝐿𝑒𝑣 , 𝛽
𝐶𝑎𝑠ℎ𝐷𝑖𝑣

𝑇𝐴 ,

𝛽 𝑀𝐵 , 𝛽
𝑁𝑊𝐶

𝑇𝐴 ,
𝛽

𝐸𝐵𝐼𝑇
𝑇𝐴 ,

2
 

 

Where, Size is the size of the enterprise; Lev is the debt 
ratio; CashDiv is the cash dividend paid by the enterprise in 
the current year; MB is the price-to-book ratio of the 
enterprise; NWC is net working capital; EBIT is earnings 
before interest and taxes; TA is total assets. 

3.2.5. Moderating Variable: Manager Ability (Firm 
Efficiency). 

This paper will use data envelopment analysis (DEA) to 
measure the managerial ability of Chinese listed companies, 
that is, using DEA to calculate the managerial ability by 
separating the influence of managers on corporate efficiency 
from the total efficiency of enterprises. On the basis of 
avoiding missing samples, this method can simply and 
intuitively calculate the operating efficiency of large sample 
companies, which has been supported by a large amount of 
literature in the field of financial accounting. It can be divided 
into two steps: first, calculate the total efficiency of 
companies by industry; Secondly, the contribution value of 
managers is separated. 

 

 (3) 

 

Table 1. Definition of Variables 

Variable name Variable symbol Variable explanation 
Financial flexibility FF Cash flexible + debt flexible 

Divestiture Div 
Divestiture transaction amount/total assets at the 

end of each year 
Financing constraints FC FC Index 

Managerial ability Firm_Efficiency Refer to Dermerjia et al. (2012) 

Size of enterprise Size 
Natural logarithm of a firm's total assets at the 

end of the year 

Firm age Age 
(Year of the year - year of listing +1) Take the 

natural logarithm 
Net profit margin on total assets Roa Net profit/total assets at year-end 

Asset-liability ratio Lev Total year-end liabilities/total year-end assets 
Cash flow ratio CF Operating cash flow/total assets 

Number of directors Board 
Natural logarithm of the number of board 

members 
Proportion of independent 

directors 
Indep 

Independent directors divided by the number of 
directors 

Shareholding ratio of the largest 
shareholder 

Top1 
Number of shares held by the largest 
shareholder/total number of shares 

Year Year  
Industry Ind SEC 2012 Industry Classification 

 

3.3. Model Design 
This paper constructs the following model to test the 

relationship between divestment and corporate financial 
flexibility: 

 
𝐹𝐹 𝛼 𝛼 𝐷𝑖𝑣 , 𝐶𝑜𝑛𝑡𝑟𝑜𝑙𝑠 𝐼𝑛𝑑 𝑌𝑒𝑎𝑟 𝜀 , 4  

 

Where, FF represents financial flexibility, Div represents 
divestment, Controls represents control variable, and ε is 
random disturbance term. 

4. Empirical Results and Analysis 

4.1. Descriptive Statistics 
Table 2 shows the results of descriptive statistics. Among 

them, the mean value of FF is − 0.032, the standard deviation 
is 0.113, the minimum value and the maximum value are − 
0.045 and 0.331 respectively, indicating that there are 
significant differences in the financial flexibility of 
enterprises. The mean value of Div is 0.040, the standard 
deviation is 0.061, the minimum value is 0.001, and the 
maximum value is 0.355, indicating that there is a significant 
gap in the degree of divestment of enterprises. 



 

156 

 
Table 2. Descriptive Statistical Results of Divestment Enterprises 

Variable N Mean SD 
FF 3087 0.032 0.113 
Div 3087 0.042 0.061 
Lev 3087 0.475 0.203 

ROA 3087 0.025 0.070 
CF 3087 0.035 0.068 

Board 3087 2.126 0.206 
Indep 3087 0.377 0.054 
Top1 3087 0.314 0.141 
Age 3087 2.410 0.675 

Variable Min p50 Max 
FF 0.267 0.045 0.331 
Div 0.001 0.019 0.355 
Lev 0.066 0.475 0.929 

ROA 0.301 0.026 0.205 
CF 0.179 0.035 0.248 

Board 1.609 2.197 2.708 
Indep 0.333 0.364 0.571 
Top1 0.075 0.293 0.708 
Age 0.000 2.565 3.296 

 

4.2. Correlation Analysis 
The results of correlation coefficient are shown in Table 4. 

Asset divestiture is positively correlated with the financial 
flexibility of enterprises (r=0.079,p<0.01), which lays a good 
foundation for the next hypothesis test. 

The VIF test of the main variables was conducted in this 
paper. The VIF value of each variable was less than 10, the 
maximum value was 1.42, the minimum value was 1.03, and 
the mean value was 1.20, indicating that the results were less 
affected by multicollinearity. 

 
 

Table 3. Correlation Analysis Results of Divestitured Enterprises 
 FF Div Lev ROA  

FF 1     
Div 0.079 *** 1    
Lev 0.193 *** 0.096 *** 1   

ROA 0.211 *** 0.026 0.335 *** 1  
CF 0.134 *** 0.072 *** 0.160 *** 0.294 ***  

Board 0.043 ** 0.086 *** 0.136 *** 0.047 ***  
Indep 0.005 0.035 ** 0.007 0.045 **  
Top1 0.124 *** 0.018 0.066 *** 0.140 ***  
Age 0.043 ** 0.038 ** 0.277 *** 0.109 ***  

 CF Board Indep Top1 Age 
CF 1     

Board 0.058 *** 1    
Indep 0.019 0.510 *** 1   
Top1 0.060 *** 0.002 0.038 ** 1  
Age 0.063 *** 0.094 *** 0.013 0.088 *** 1 

Note: *, ** and *** indicate significance at the level of 10%, 5% and 1%, respectively; T-values of robust standard errors 
are in parentheses. Same below. 

 
 

4.3. Regression Analysis 
This paper uses dual fixed effects of year and industry for 

regression. The FF coefficient of column (1) in Table 3 is 
0.210, significant at the level of 1%, indicating that there is a 
positive correlation between divestment and corporate 
financial flexibility. The regression results of Column (2) 

show that the coefficient between Div and FF is 0.141, which 
is significant at the level of 1%, and the coefficient of the 
interaction term between Div and Firm_Efficiency is 0.263, 
which is significant at the level of 10%, indicating that the 
managerial ability positively regulates the relationship 
between them. To sum up, the above hypotheses are all valid. 

 
 
 
 
 
 
 
 



 

157 

Table 4. Main Regression Results of Divestment and Financial Flexibility 

VARIABLES 
(1) 
FF 

(2) 
FF 

Div 
0.210 * * * 

(6.09) 
0.141 * * * 

(4.570) 

Firm_Efficiency  
0.076 * * * 

(6.113) 

Div×Firm_Efficiency  
0.263 * 
(1.728) 

Lev 
0.545 * * * 

(43.09) 
0.141 * * * 

(12.60) 

ROA 
0.002 
(0.04) 

0.114 * * * 
(3.640) 

CF 
0.102 * * * 

(2.95) 
0.157 * * * 

(5.202) 

Board 
0.029 * * 

(2.34) 
0.042 * * * 

(3.845) 

Indep 
0.079 * 
(1.70) 

0.129 * * * 
(3.222) 

Top1 
0.053 * * * 

(3.33) 
0.042* * * 

(2.999) 

Age 
0.001 
(0.27) 

0.010 * * * 
(3.059) 

Constant 
0.174 * * * 

(4.47) 
0.152 * * * 

(4.493) 
Observations 3133 2976 

R-squared 0.460 0.239 
Ajusted R2  0.223 

F test  0 
t-statistics in parentheses *** p<0.01, ** p<0.05, * p<0.1 

 

4.4. Robustness Test 
4.4.1. Surrogate Variables 

Considering the robustness of the conclusion, the explained 

variable FF is measured by the equal-weighted average 
market value of financial flexibility, which is replaced by the 
weighted total market value of financial flexibility. It can be 
seen that the regression results are still robust. 

 
Table 5. The Regression Results of Distinguishing Property Rights 

VARIABLES 
(1) 
FF 

Div 
0.190 * * * 

(4.879) 

Firm_Efficiency 
0.0680 * * * 

(4.329) 

Div×Firm_Efficiency 
0.254 

(1.322) 

Lev 
0.610 * * * 

(43.24) 

ROA 
0.00376 
(0.0953) 

CF 
0.110 * * * 

(2.888) 

Board 
0.0378 * * * 

(2.759) 

Indep 
0.125 * * 
(2.475) 

Top1 
0.0468 * * * 

(2.672) 

Age 
0.00657 * 

(1.698) 

Constant 
0.148 * * * 

(3.461) 
Observations 2976 

R-squared 0.515 
Ajusted R2 0.505 

F test 0 
t-statistics in parentheses *** p<0.01, ** p<0.05, * p<0.1 

 



 

158 

 

4.4.2. Reduce the Sample Size 
The novel coronavirus pandemic has brought 

unprecedented external environmental risks to enterprise 

operations. In order to eliminate this impact, 371 samples in 
2020 were removed from this paper for re-regression. Table 6 
shows that the regression results are basically consistent with 
the above. 

 
Table 6. Main Regression Results of Divestment and Financial Flexibility 

VARIABLES 
(1) 
FF 

Div 
0.139*** 
(4.246) 

Firm_Efficiency 
0.0752*** 

(5.810) 

interact 
0.305* 
(1.922) 

Lev 
-0.136*** 
(-11.66) 

ROA 
0.0773** 
(2.296) 

CF 
0.163*** 
(5.143) 

Board 
0.0401*** 

(3.537) 

Indep 
0.117*** 
(2.752) 

Top1 
0.0337** 
(2.319) 

Age 
-0.00864*** 

(-2.672) 

Constant 
-0.141*** 
(-3.958) 

Observations 2,611 
R-squared 0.220 
Ajusted R2 0.202 

F test 0 
t-statistics in parentheses *** p<0.01, ** p<0.05, * p<0.1 

 
Table 7. Main Regression Results of Divestment and Financial Flexibility 

VARIABLES 
(1) 

State-owned enterprises 
(2) 

Non-state-owned enterprises 

Div 
0.0774 
(1.436) 

0.189 * * * 
(4.966) 

Firm_Efficiency 
0.0754 * * * 

(3.918) 
0.0777 * * * 

(4.736) 

Div×Firm_Efficiency 
0.182 

(0.741) 
0.368 * 
(1.897) 

Lev 
0.0884 * * * 

(4.943) 
0.172 * * * 

(11.82) 

ROA 
0.184 * * * 

(2.730) 
0.0728 * * 

(2.001) 

CF 
0.119 * * 
(2.507) 

0.199 * * * 
(5.119) 

Board 
0.00245 
(0.153) 

0.0635 * * * 
(4.166) 

Indep 
0.0209 
(0.360) 

0.244 * * * 
(4.330) 

Top1 
0.00378 
(0.168) 

0.0417 * * 
(2.191) 

Age 
0.0243 * * * 

(3.643) 
0.0110 * * * 

(2.777) 

Constant 
0.0346 
(0.657) 

0.236 * * * 
(4.847) 

Observations 1073 1901 
R-squared 0.251 0.273 
Ajusted R2 0.249 0.249 

F test 0 0 
t-statistics in parentheses *** p<0.01, ** p<0.05, * p<0.1 



 

159 

 

4.5. Further tests 
4.5.1. Heterogeneity test 

Xu and Wu (2021) [13] and Zhang et al. (2019) [14] found 
that corporate characteristics are important factors that affect 
the economic consequences of divestment. It can be seen that 
divestment by state-owned enterprises cannot effectively 
improve the financial flexibility, while divestment by non-
state-owned enterprises can effectively improve the financial 
flexibility of enterprises. 

4.5.2. Mechanism Checking 
According to the previous analysis, the alleviation of 

financing constraints plays an important role in the process of 
divestment. Therefore, this paper takes corporate financing 
constraints (FC) as an intermediary variable to test the 
mechanism. It can be seen from Column (2) of Table 7 that 
divestment Div is negatively correlated with financial 
constraints FC, and the correlation coefficient is − 0.053, 
which is significant at the level of 5%. Column (3) shows that 
divestment Div is positively correlated with financial 
flexibility FF after controlling financial constraints FC, and 
the coefficient is 0.085, which is significant at the level of 
10%. It shows that asset stripping can effectively improve the 
financial flexibility of enterprises by alleviating financial 
constraints. 

 

Table 8. Main Regression Results of Divestment and Financial Flexibility 

VARIABLES 
(1) 
FF 

(2) 
FC 

(3) 
FF 

FC   
0.085 * * 

(2.28) 

Div 
0.126 * * 

(2.42) 
0.053 * * 

(3.16) 
0.130 * * 

(2.54) 

Size 
0.120 
(1.74) 

0.223 * * * 
(4.04) 

0.101 
(1.52) 

Lev 
0.118 * * * 

(7.46) 
0.001 
(0.14) 

0.118 * * * 
(7.50) 

ROA 
0.177 * * * 

(4.32) 
0.076 * * * 

(4.51) 
0.171 * * * 

(4.20) 

Cashflow 
0.167 * * * 

(4.54) 
0.002 
(0.12) 

0.167 * * * 
(4.65) 

Board 
0.045 * * * 

(3.70) 
0.002 
(0.18) 

0.045 * * * 
(3.69) 

Indep 
0.125 * 
(2.23) 

0.056 * * 
(2.29) 

0.129 * * 
(2.32) 

Top1 
0.052 * * 

(2.42) 
0.023 
(1.64) 

0.054 * * 
(2.55) 

ListAge 
0.006 
(0.81) 

0.038 * * * 
(14.67) 

0.009 
(1.11) 

Constant 
0.237 
(1.19) 

1.987 * * * 
(11.35) 

0.068 
(0.35) 

Observations 3084 3084 3084 
R-squared 0.228 0.330 0.230 

t-statistics in parentheses *** p<0.01, ** p<0.05, * p<0.1 
 

5. Conclusions and Policy 
Recommendations 

Based on the data of listed companies from 2011 to 2020, 
this paper studies the impact of divestment on corporate 
financial flexibility and its mechanism. The results show that 
divestment can promote the improvement of corporate 
financial flexibility, and the managerial ability can 
significantly regulate the relationship between divestment 
and financial flexibility, and higher managerial ability will 
promote the positive relationship. Further analysis shows that 
financial constraints and cash holdings are the important 
influencing mechanisms of divestment on corporate financial 
flexibility. The positive effect and moderating effect of 
divestment on financial flexibility are more significant in non-
state-owned enterprises. 

Based on the conclusions, the following suggestions are put 
forward: 

(1) As an effective means of optimizing resource allocation, 
divestment plays an important role in enterprise innovation 
and development as well as industrial transformation and 

upgrading. The divestment of Chinese enterprises is 
becoming more and more frequent. It should be recognized 
that the value effect of divestment is closely related to the 
financial flexibility of enterprises, which can improve the 
efficiency of resource allocation, improve the 
competitiveness and market value of enterprises, thus 
conducive to the continuous development of enterprises' 
R&D and innovation activities, and achieve good 
development of enterprises. 

(2) Enterprises employ high-ability managers to manage 
their enterprises. If the enterprise managers have rich 
experience in divestment, they can more skillfully alleviate 
the financial situation of the enterprise and improve the 
financial flexibility of the enterprise, so as to enhance the risk-
bearing ability of the enterprise. 

(3) The financial market system should be improved to 
make full use of its functions of reducing financing costs and 
improving resource allocation efficiency, so as to make the 
divestment assets fairly priced in the market, guide the capital 
flow to the most likely successful investment direction, and 
accelerate the innovation of enterprises, so that the enterprises 



 

160 

with good performance and good management can benefit 
from the specialization and efficiency brought by asset 
divestment. 

Acknowledgment 
This work was supported in part by a grant from: the 

Postgraduate Scientific Research Innovation Fund of Anhui 
University of Finance and Economics (ACYC2022085) . the 
Postgraduate Scientific Research Innovation Fund of Anhui 
University of Finance and Economics (ACYC2022082). the 
Natural Science Key Research Project of Anhui Provincial 
Department of Education (2022AH050603). 

References 
[1] Tang Qingquan & Li Ping.(2016). Research on the 

effectiveness of asset divestiture and business reorganization. 
Contemporary economic management (07), 14 to 24. Doi: 
10.13253 / j.carol carroll nki DDJJGL. 2016.07.003. 

[2] Guo Wei, Zhai Jun & Guo Jing.(2020). Research on asset 
divestiture and enterprise value from the perspective of 
strategic transformation. Soft Science (11),95-100. 
doi:10.13956/ j.S.1001-8409.2020.11.16. 

[3] Yan Fuhai & Li Huansheng.(2014). A review of Chinese 
enterprise asset stripping research. Accounting communication 
(12), 103-105. The doi: 10.16144 / j.carol carroll nki issn1002-
8072.2014.12.033. 

[4] Xu H. (2012). Marketization process, property rights allocation 
and asset divestiture performance of Listed companies: A study 
from the perspective of co-jurisdictional transactions. Nankai 
Management Review (03),110-121. 

[5] Xue Youzhi, Zhang Rongrong, and Zhang Yujing.(2022). 
Vertical executive placement and asset divestiture strategy. 
Foreign economic and management (05), 3-18. Doi: 10.16538 
/ j.carol carroll nki fem. 20211212.203. 

[6] Xue, Y., Xibei, T. & Zhou, J. (2021). The mechanism and 
influencing factors of enterprise asset divestment: Review and 
prospect. Management Modernization (05): 125-129. 
doi:10.19634/j.cnki.11-1403/c.2021.05.027. 

[7] Zhang Hao & Wang Wei.(2013). Characteristics and 
Motivation of asset divestiture of Chinese listed companies. 
Modern Commerce and Industry (08),96-97. (in Chinese) 
doi:10.19311/j.cnki.1672-3198.2013.08.052. 

[8] Zhang Xing & Chen Xingshu.(2022). Asset stripping, regional 
financial development and R&D investment. Monthly Journal 
of Finance and Accounting (22),56-65. doi:10.19641/j.cnki.42-
1290/f.2022.22.007. 

[9] Li Ping, Su Liangyu & Xu Xin.(2019). Can divestiture 
stimulate R&D investment of Chinese enterprises? -- Research 
based on the perspective of financing constraints. Journal of 
sun yat-sen university (social science edition) (01), 188-198. 
The doi: 10.13471 / j.carol carroll nki jsysusse. 2019.01.020. 

[10] Guo Wei & Guo Zeguang.(2020). The impact of asset 
divestiture on corporate financial performance and its 
mechanism. Journal of Guangdong University of Finance and 
Economics (02),55-67. 

[11] Zeng Aimin, Zhang Chun, Wei Zhihua. Financial crisis shock, 
financial flexibility reserve and Corporate investment behavior: 
Empirical evidence from Chinese listed companies [J]. 
Management World, 2013(4):107-120. 

[12] Guo Wei & Wang Shaohua.(2022). The impact of asset 
stripping on corporate financialization: "From real to virtual" 
or "from virtual to real". Securities Market Review (04),57-68. 

[13] Xue Youzhi & Wu Qian.(2021). Who implements fewer 
divestiture transactions: State-owned enterprises or non-state-
owned enterprises? Modern Finance and Economics (Journal 
of Tianjin University of Finance and Economics)(03), 3-
17.doi:10.19559/j.cnki.121387.2021.03.001. 

[14] Zhang Xiaoyue, Zhao Siwei & Gong Yu.(2019). Research on 
the impact of asset-stripping turnaround on innovation 
performance of listed companies. Financial Theory and 
Practice (10), 27-34.