The Status Quo and the Divestment Decisions

Although previous academic research has focused on the factors influencing divestment decision-making, there is no research dealing with the influence of the status quo in this decision. This paper investigates if the status quo influences venture capital divestment decision-making at the country level. The analysis uses regression analysis of panel data for 24 countries over the 2007-2015 periods. We find that initial public offering, trade sale, and liquidation are the most preferred exit routes. The choice of divestment decision does not depend on the choice in the previous year. This result shows that the divestment decision-making of venture capital firms is not vulnerable to the power of the status quo. We use only a few variables in our empirical model. Using more variables will promise research. Insights from the paper suggest that the CEO of the venture capital firm should perform a post-analysis of their divestment to understand their past behavior.