Abstract: | This study examines the association between long-term performance plans and wealth effects accruing to stockholders of divesting firms at announcements of sell-off proposals. The results indicate that divesting companies with long-term performance plans experience a more favorable stock market reaction at the announcement of sell-off proposals relative to firms without long-term performance plans. The findings imply that long-term performance plans serve as an effective mechanism to motivate managers to make better decisions. |