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What is Divestment Option Value

Chapter 12
Handbook of Research on the Strategic Management of Family Businesses
When the present value of the remaining cash-flows of an asset or project falls below its liquidation value at a given period, the difference reflects the value of the option of divestment. It is the additional loss in value that the owners could risk if they do not divest immediately. The divestment option value varies across family business emotional archetypes.
Published in Chapter:
The Strategic Divestment Decision in the Family Business Through the Real Options and Emotional Lenses
Rania Labaki (EDHEC Business School, France) and Gérard Hirigoyen (University of Bordeaux, France)
Copyright: © 2020 |Pages: 36
DOI: 10.4018/978-1-7998-2269-1.ch012
Abstract
Divestments have received little attention in family business research, although representing one of the most important strategic and financial decisions. Additionally, they have been insufficiently studied from the owning family's emotional perspective. This chapter contributes in filling these gaps by focusing on the core entity of the family business as object of divestment from the Real Options and Regret theoretical lenses. It suggests a characterization of the family business divestment decision and a series of propositions with case vignettes around configurations of divestment options, their valuation, and influence in different emotional family business archetypes.
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