In this study, we examine how a CEO’s organizational identification influences their decision-making, with a particular focus on divestiture decisions. Building on the organizational identification research, we argue that divestitures require reevaluating a company’s scope and boundaries. Such changes may threaten to a CEO’s personal identity, particularly when it is closely aligned with the company’s identity. We thus hypothesize that CEOs who strongly identify with their organizations are less likely to pursue divestitures due to perceived risks to the organization’s identity and, thus, their own identity. We also examine how corporate and industry norms moderate the influence of organizational identification on a CEO’s divestiture decisions. We focus on three factors: the size of the top management team, the company’s prior experience with divestitures, and the prevalence of divestitures within the industry. Using data from U.S. firms in the S&P 500 between 2011 and 2022, we find broad support for our hypotheses. This study contributes to corporate strategy research and advances the discussion on the implications of organizational identification in strategic decision-making.
