Does corporate retrenchment gain value? A study from Malaysia

Abstract

This paper aims to investigate the performance of retrenchment strategy by gauging the ownership structure and identity for a sample of 596 Malaysian listed firms over 2008-2013. The results show positive relationship between the excess values of retrenchment cost. Further, the findings show that there is a negatively significant relationship between ownership structures and excess value, where foreign and government underperformed in imposing retrenchment strategy. However, our research further indicates that ownership concentration does not play a significant role on the association between excess value and retrenchment cost. This portrays the effectiveness of retrenchment strategy in value creation, and the role of corporate governance in that relationship. Secondly, it provides valuable insight to regulators and policymakers by demonstrating that retrenchment strategy might have a beneficial to create value. In summary, this research implies that retrenchment strategy might bring value to certain types of firms and certain levels of ownership.