Corporate restructuring in Japan: an event-study analysis

Abstract

The implementation of the Commercial Rehabilitation Law (CRL) on April 1, 2000, was considered a key event in setting up the official infrastructure supporting corporate restructuring in Japan. This study evaluates the stock price impact of restructuring announcements before and after the CRL implementation using event-study analysis. Following the CRL implementation, the results suggest an improvement in market credibility of restructuring announcements based on better disclosure, mergers, and to a lesser extent, labor force reductions. In contrast, the credibility of restructuring announcements aimed at reducing excess capital deteriorated.