Corporate Restructuring Activities Research Articles

A study of corporate diversification and restructuring activities in the 1980s and 1990s using multiple measures

Using popular/common measures of diversification employed by industrial organization scholars (Jacquemin-Berry entropy measure) and strategy scholars (size of the primary business segment), this study examines the corporate diversification and restructuring activities of American firms (sample from the Fortune 250 list) in the 1980s and 1990s. There is empirical support for the widespread notion that in the 1980s and 1990s, firms underwent major restructuring efforts by divesting unrelated (unprofitable) businesses and strengthening their core business units and related segments. Additionally, the results illustrate the consistencies and discrepancies between the above measures.

Real Estate Market Reaction to Public Listings and Acquisition News of Malaysian REITs

Executive Summary. This study examines the market reactions of Malaysia's real estate investments trusts (REITs) and property stocks to corporate restructuring activities. Tests of price behavior of fifty-eight listed property stocks and three property trusts in Malaysia towards the new listing of Mayban Property Trust Fund One in 1997 show that REIT and property stock prices react significantly with a negative abnormal return of 2.3% and 4.9% respectively during the [−10, 0] event interval. In the tests of the acquisition announcement, the results show a significantly negative 1.9% price adjustment during the [−1, 0] event interval in the REIT market, but no significant excess returns in the listed property stock market around the event interval.

The nature and extent of corporate restructuring within Europe's single market: Cutting through the hype

The nature and extent of corporate restructuring within Europe's single market: Cutting through the hype

Stakeholders Versus Stockholders and Financial Ethics: Ethics to Whom?

Corporate finance is under attack. Commentators mention that corporate managers have enriched themselves and shareholders, and in the process have failed to consider the interests of all stakeholders (Hennessy, 1989, Alkhafaji, 1989, Newton, 1989, Dunfee, 1989, Steidlmeier, 1989, Jones and Hunt, 1991). They cite the active corporate control market that produced hostile takeovers, leveraged buyouts, and corporate restructuring activity, all presumably causing a reduction in social welfare. This view is now beginning to permeate itself into the financial education debate. For example, Hawley (1991) suggests that financial educators are abdicating their responsibility of helping prepare corporate managers to recognize and deal with business ethics‐social responsibility effectively. Hawley proposes that the shareholder wealth maximization model for corporate management rationalizes the commission of unethical or socially irresponsible actions. Because of this ongoing criticism being levied against the practice of corporate finance, financial educators are now moving to incorporate ethics in the finance curricula. Although this move may be welcomed, we suggest that financial educators proceed with caution.

Executive succession as an antecedent to corporate restructuring

AbstractOne of the most visible adjustments in company strategies in recent years was the dramatic increase in the level of corporate restructuring activity that took place during the 1980s. Strategic decisions that result in the realignment of firms with their environments are likely to be influenced by the composition of the top management team. This study found that firms experiencing non‐routine executive succession events within the management team subsequently underwent more restructuring activity than did firms without non‐routine executive turnover. These findings suggest that unexpected executive turnovers can significantly alter managerial perspectives within top teams and may thus provide an important mechanism by which firms adapt to their competitive environments. © 1995 by John Wiley & Sons, Inc.

EXTERNAL CAPITAL MARKET CONTROL, CORPORATE RESTRUCTURING, AND FIRM PERFORMANCE DURING THE 1980s

The corporate restructuring activity of the 1980s, sparked by potential external capital market intervention, is believed to have been primarily directed at correcting the diversification mistakes of the 1960s and 1970s, which had led to poor corporate performance. Assuming that investor gains from corporate restructurings are unbiased expectations regarding future efficiency gains, many researchers concluded that the market for corporate control is an efficient external control mechanism and that the restructuring programs of the 1980s will, on average, be followed by substantial improvements in corporate performance. To examine whether those improvements were achieved, this paper analyzes the long‐term operating and financial performance of the 50 most aggressive US participants in the takeovers and corporate restructuring activity during the 1980s. The results support the hypothesis that the market for corporate control is an efficient external corporate control mechanism of last resort.

LBOs, Corporate Restructuring, and the Incentive-Intensity Hypothesis

This paper uses a detailed database on corporate operations to investigate the effects of leveraged buyouts on corporate restructuring activity in a sample of 33 large LBO firms. The evidence we present strongly suggests that the governance structure of LBO firms is able to induce managers to forego growth and downsize firms more effectively than the governance structure of public corporations. The evidence is also consistent with the argument that one purpose of leveraged buyouts is to reconfigure target firms' operations. The results of this study suggest that corporate restructuring activity may be an important source of the efficiency gains observed in prior studies of the accounting performance of LBO firms.

How well do foreign firms compete in the United States?

How well do foreign firms compete in the United States?

Defending Against Hostile Takeovers: Impact on Shareholder Wealth

Innovations in takeover financing, less restrictive regulatory requirements, and a general desire to enhance market position have led to a substantial increase in corporate takeover and restructuring activity. In response target firm managers have become increasingly active in devising defensive strategies and tactics designed to ward off hostile bidders. It is well‐ documented, however, that large wealth gains accrue to target firm shareholders in mergers and acquisitions. Thus the emergence of such terms as “shark repellents”, “poison pills”, and “greenmail”, raises the question of whose best interests are really being served by antitakeover measures.

Staying with or Leaving the Organization

Abstract Corporate restructuring activities in American corporations during the 1980s have created a variety of dilemmas for individuals in the mid-career years. This article proposes a two dimensional framework for understanding the experience of those facing these mid-career restructuring dilemmas. One dimension is whether the individual leaves the organization or remains in the organization. The other dimension is whether the decision is voluntary or involuntary. Interviews indicate that those most successful in managing the transitions of this career period are flexible in response to changing circumstances, have a high level of awareness, are characterized by information seeking behavior, and have the capacity to venture beyond previous boundaries and known ground.

U.S. Corporate Leverage: Developments in 1987 and 1988

THE YEARS 1987 and 1988 saw some dramatic developments in U.S. financial markets. The 1987 stock market crash was followed in 1988 by intense corporate restructuring activity, including a record volume of stock repurchases and leveraged buyouts.I Meanwhile use of debt financing by U.S. corporations continued to increase, even among firms not involved in ownership changes or major restructurings. The increase in corporate leverage has caused some concern to policymakers responsible for stability of U.S. financial system. Federal Reserve Board Chairman Alan Greenspan testified in January 1989 to Senate Finance Committee that the spate of mergers, acquisitions, leveraged buyouts, share repurchases, and divestitures in

Organization Form, Residual Claimants, and Corporate Control

EUGENE FAMA and Michael Jensen's treatment of the "Separation of Ownership and Control" is both insightful and informative. It deepens our understanding of corporate control, and the analysis of residual claimants usefully extends the economics of internal organization to include partnerships, mutuals, nonprofits, and the like. The basic argument is this: specialized governance structures arise in response to the efficiency needs of each type of organization. This is an important argument and one with which I broadly concur. They couple this, however, with a strong suggestion that these structures have reached a high degree of refinement-on which account there is not now, if indeed there ever has been, an organization control problem with which scholars and others are legitimately concerned. On this point I have grave doubts. My discussion of the paper addresses three issues: What is the relation, if any, of the hierarchical organization of the firm to economic performance? What relation, if any, does residual claimant status have to the composition and character of the board of directors? And is there now or has there ever been a corporate control problem? I deal with each of these issues in order.