Issue 4, 2017

Panibratov A. Yu., Brown T. A., Klishevich D. S. Divestment of Foreign Multinational Companies from Russia.

The purpose of this paper is to explore the reasons which contribute to the final foreign divestment (FD) decision of multinational companies (MNCs) and mode of divestment. In this paper we provide the explanation of reasons that make MNCs to exercise foreign divestment. Both internal and external factors become a catalyst for foreign divestment; therefore, the mode of divestment can be explained through the usage of different theories. In this paper we use real options theory and prospect theory which have proven to explain the FD decision and the mode of foreign divestment, as was shown by the analysis of four cases of foreign MNCs divesting from the Russian market. The companies under investigation are General Motors, Carlsberg, Lafarge Holcim and Stockmann. All of them decided in favor of the divestment from the Russian market but pursued this strategy differently — through full or partial divestment. The paper examines how they shaped their divestment decisions in a specific context of the Russian market, characterized by high volatility and unpredictability. According to the real options theory, the divestment decision is shaped by the level of uncertainty, previous divestment experience of MNCs and by the managers’ estimation of the risks connected to FD. According to the prospect theory, an approach towards FD is influenced by the experience of a company and by the image of the possible loss as a result of FD. This paper contributes to the scarce research literature on FD of MNCs from Russia. Keywords: foreign divestment, multinational companies, real options theory, prospect theory, Russia.

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