Corporate Restructuring Activities Research Articles

Corporate carbon footprint and market valuation of restructuring announcements

AbstractThe call for greener and more sustainable corporate practices triggered a surge in corporate restructuring. In this study, we investigate the impact of carbon emissions on the market reaction to announcements of corporate restructuring activities. Using a sample of US firms, we find that investors discount the value of corporate restructuring announcements when firms have higher levels of carbon emissions. Our results indicate that emissions are negatively associated with cumulative abnormal returns (CAR), cumulative total returns (CTR), and buy and hold abnormal returns (BHAR) around announcements. This effect is more pronounced for firms with a lower risk of bankruptcy, those financially constrained, and those with lower growth opportunities. We also find that high emissions at announcements are negatively associated with post-restructuring financial and market performance. Overall, our results highlight the growing implications of firm-level carbon emissions for corporate market valuations, especially amongst firms undertaking restructuring.

A Study and Analysis on Recent Mergers in India

This research paper aims to provide a comprehensive study and analysis of recent merger and demerger activities in India. It examines the motivations, strategies, and impacts of mergers and demergers on the Indian corporate landscape. Through a detailed analysis of recent case studies, the paper delves into the key factors driving these corporate restructuring activities, including regulatory changes, market dynamics, and strategic imperatives. Additionally, it evaluates the financial performance, market reactions, and implications for stakeholders involved in such transactions. The research contributes to the understanding of the merger and demerger trends in India, offering insights into the evolving corporate strategies and their implications for the Indian economy. Furthermore, it explores the legal and regulatory framework surrounding mergers and demergers, providing a holistic view of the process and its challenges.

The Legal Impact of Merger, Acquisition, and Other Corporate Restructuring Activities on Employment Relationship Based on Labor Law in Indonesia After the Enactment of the Job Creation Law

Mergers, acquisitions, and other corporate restructuring activities are regarded as one of the strategic steps to maintain the company's existence and to carry out business growth, which can be done when the company is in financial difficulties or when the company intends to develop its business and increase its revenue. However, there have often been problems in the past related to employment relations and other legal issues on employment law. This study aims to determine the legal impact of merger, acquisitions, and other corporate restructuring activities on employment relations based on employment regulation in Indonesia after enactment of Law concerning Job Creation. This study uses the normative juridical method with descriptive analysis characteristics. The results of the study show that in the event of a corporate restructuring activities, the employment relationship may continue as long as there is no termination of employment, whether it arises at the initiative of the employer or the employee. The law provides preventive as well as repressive protection for employees in the event of corporate restructuring activities.

Goodwill reporting in corporate acquisitions: The effects of managerial discretion under the new accounting rules

Goodwill is a critical issue in the accounting of corporate restructuring activities in terms of both purchase price allocation in corporate acquisitions and the subsequent write-downs. Although the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) new accounting standards provide a reference point for goodwill recognition, the complexity of fair value adjustments and the extensive subjectivity involved in assessing goodwill still make its allocation and the impairment-only approach limitedly transparent. Therefore, this study explores the impact of IFRS 3 (International Financial Reporting Standard 3) on management discretion in goodwill reporting. From a methodological standpoint, the hypotheses are tested on a sample of 68 acquisitions executed by Italian-listed acquirers in the 2012–2020 period. Our results confirm the potential for managerial opportunistic behavior in light of the signaling role of goodwill for investors.

Nowhere to hide: Response of corporate restructuring activities to mandatory segment disclosure

We examine the effect of mandatory financial disclosures, specifically SFAS 131, on corporate restructuring activities by using difference-in-differences (DiD) and regression discontinuity design (RDD) settings. After the adoption of SFAS 131, firms are less likely to engage in acquisitions than are the control firms. Furthermore, conditional on firms' engagement in acquisition activities, acquirers are less likely to complete their initiated acquisition deals, especially for those value-destroying deals. After the implementation of SFAS 131, we find that the equity market reacts positively to large and diversifying deals that are subject to mandatory segment disclosures. Overall, our results suggest that the segment disclosure standard helped prevent managers from undertaking new, value-destroying M&As post-SFAS 131. Finally, these SFAS 131–induced corporate restructuring activities are shown to help reduce the risk of a stock price crash.

Literature Review On Merger and Acquisition (Theories and Previous Studies)

Merger and Acquisition (M&A) is a way for companies to grow faster than organic business growth and can be a channel for companies to strengthen their global market position and increase competiteveness. M&A activities in the world have a large volume and value of several major commodities such as coal, industrial metal, silver, lead, zinc, copper, steel, aluminum etc. In 2018 (January to December) the total value of M&A transactions for the coal and metal sector reached USD 60 bio with the largest portion in coal commodities and transaction volume of 320 transactions.M&A is one of the strategic options in corporate restructuring activities that can provide more access to companies in increasing profits, market control or market share and increasing competitiveness (competitive advantage) to face the world market which is currently unstoppable.In this study, the problem to be answered is what are the theories behind the occurrence of M&A and also previous research that has been done related to M&A. To answer this problem, the literature review method will be used. The results obtained are expected to be used in future research in all M&A events. With this literature review, the motive behind the occurrence of M&A can also be well known.

A Systematic Literature Review on Mergers and Acquisitions: A Bibliometric Analysis Approach

Many studies have examined the effects of mergers and acquisitions, but their results vary significantly. Thus, mergers and acquisitions are one of the most popular corporate restructuring activities undertaken by various organizations, institutes, companies (both private and public), agencies, and establishments, all in a quest to achieve the desired aim of the companies. But a pertinent question exists as to if mergers and acquisitions (M&A) have produced the desired goals and objectives of the companies. Therefore this study aims to examine the results, empirical preference, and author's opinions of existing literature as to if M&A had produced synergy gains or not. Bibliometric analysis is the methodological procedure used in this study. A total number of fifty (50) high-profile literatures were qualitatively examined, and it shows that M&A produced synergy gains to the level of 48%. From the analysis, M&A was also found not to produce synergy gain to the level of 28%, thus making the remaining 24% to be associated with authors whose views weren't explicit and those that are undecided to M&A producing synergy gains. This review study recommends that horizontal mergers and acquisitions be encouraged to increase the companies' market share, leading to their desired goals and objectives.

Financial Market Friction and Corporate Restructuring Activities in China

ABSTRACT This study empirically investigates the effect of external financial market friction on restructuring activities, based on panel data of listed Chinese firms from 2004 to 2018. The results show that there is a positive correlation between financial market friction and the number of restructuring deals. We also find that high financial market friction increases preference for cash payments and the likelihood of mergers and acquisitions. These findings add to the restructuring literature by capturing heterogenous restructuring forms. They also deepen the understanding of the firm boundary theory, by suggesting that firms have incentives to increase their scopes when facing external market distress.

Nowhere to Hide: Corporate Restructuring Activities Response to Mandatory Segment Disclosure

We examine the effect of mandatory financial disclosures, specifically the segment disclosure SFAS 131, on corporate restructuring activities such as mergers and acquisitions (M&As) and spin-offs. After the implementation of the mandatory segment disclosure standard, we find that firms have less incentive to engage in M&A activities and to complete the M&A deals. However, conditional on engaging in acquisition activity, SFAS 131 drives firms to acquire large diversified targets. The market perceives these large diversified M&As as value- enhancing after the SFAS131. Similarly, we further show that the probability of a division being spun off is lower after the SFAS 131 adoption than that before the SFAS 131 adoption, suggesting that firms are more likely to spin off their different operating units ex-ante to avoid disclosing these unit’s information and to strengthen their public image ex-post. We also find a positive market reaction to spin-off events, especially after the SFAS 131 was mandated. Overall, our results suggest that the segment disclosure standard disciplines managers’ (value- enhancing) corporate restructuring activities.

The Impact of Director Heterogeneity on Corporate Restructuring Patterns: Beyond Insider/Outsider Duality

This article uses the large US freight railroads, forced to restructure after deregulation due to competitive pressures, as field experiment to study the impact that board composition can have on corporate restructuring activities. In particular, it investigates the effect of director heterogeneity on the nature of restructuring measures by examining a unique firm-level panel of US freight railroads data covering a twenty-year period. While most of the existing empirical research investigating the impact of board composition on specific corporate decisions focuses on the distinction between independent and non-independent directors as main source of director heterogeneity, this article goes beyond this approach and conducts a more fine-grained analysis by classifying directors into categories that seek to better reflect board diversity. CEO characteristics and exogenous environmental characteristics are also taken into account. Overall results indicate that both board composition and CEO characteristics affect corporate restructuring patterns. Results show that there are significant differences in the way directors influence restructuring decisions depending upon their background and stakeholder condition. These findings suggest that boards' diversity matters for the understanding of corporate behavior. They point to the importance of integrating into board research measures of board composition reflecting the potential diversity of interests.

Learning To Make Acquisitions From Related Corporate Restructuring Activities

In this paper, we investigate whether firms can learn to make acquisitions from a related corporate restructuring activity, namely divestitures or sell-offs. We suggest that through divestitures, f...

Impact of mergers and acquisitions on stock prices: The U.S. ethanol-based biofuel industry

Corporate restructuring activities in the form of mergers and acquisitions (M&As) are ongoing in the U.S. ethanol-based biofuel industry. With regard to M&As, a widespread concern is about financial performance of an individual firm and stable financial performance of the overall industry. Using an event analysis method, this study explores the impact of recent M&As on stock prices and value of the firm of publicly traded ethanol-based biofuel industry between 2010 and 2012 in the United States. Results regarding the average cumulative abnormal returns of acquiring firms suggest that the market positively responded toward recent M&As in the industry. Around 4% positive growth on a 60-day event window was attributed to M&As using market-adjusted market portfolio. A significant positive 0.47% gain in cumulative returns in a 4-day event window and a 2.7% positive gain in a 10-day event window were suggested by this study.

Share Repurchases, Signalling Effect and Implications for Corporate Governance: Evidence from India

It is worth mentioning that a great deal of financial liberalisation, privatisation and internationalisation policies in emerging economies have significantly increased the corporate restructuring activities like mergers, acquisitions, share repurchases and stock splits, among others. Indeed, the activity that is investigated in this article is ‘share repurchases’ and its effect on stock returns and price-to-earnings (P/E) ratio. More deeply, this article will answer the research question—does a share repurchase offer abnormal returns around the announcement? Thus, it is performed in one of the Asian emerging markets—India. To do so, we use event-study method to examine abnormal returns and P/E signalling around the announcement of 64 share repurchases, announced during 2008–2009. It is found that stock performance is not adequate and notices lower as well as negative earnings during post-buyback period. Briefly, we conclude that share repurchases assure short-term returns and observe lower P/E compared to pre-buyback period. In addition, we show some interesting results that derived from industrial and services sectors. The outcome of this article would help financial analysts, financial advisors, corporate enterprises and regulatory bodies in designing policies on earnings distribution, managerial incentives, takeovers and so forth of regulatory aspects.

Making Or Buying Employees: The Relationship Between Human Resources Policy, Business Strategy And Corporate Restructuring

<span>This study used cross level data from two different levels of management to examine the relationship between human resources policy, business strategy and corporate restructuring activities. The results suggested that corporate restructuring activities, not business strategy, accounted for a significant proportion of variance in the career patterns of managers. Organizations that had experienced more restructuring in the form of cutbacks in operations, reductions in force, voluntary terminations, and reorganizations had a remaining work force that had an external labor market orientation. These results challenge the theory of Miles & Snow (1984) and Sonnenfeld and Peiperl (1988) that suggests an organizations business strategy should be reflected in human resource policy.</span>

Corporate Governance and Restructuring Activities Following Completed Bids

Research Question/Issue: We examine the extent to which effective corporate governance impacts three restructuring choices following completed acquisitions – significant adjustment to workforce; sa ...

Corporate Restructuring and Governance Implications: A Case Study of the Guoco Group

I study a series of restructuring activities undertaken by Guoco Group Limited in recent years and the implications on minority shareholders. The divestment of Dao Heng Bank Group to DBS Group reaped substantial benefits for Guoco, including an enormous cash reserves to fund future investments. However, the cash hoard was not implemented to the best use by Guoco’s managers. Subsequently, Guoco was involved in a number of share buybacks schemes. The share‐buybacks met strong resistance from the minority shareholders and eventually forced out the second largest shareholders. Guoco was also engaged in related party transaction involving its subsidiaries in the property development business. Overall, I find evidences suggesting that corporate restructuring activities enhance the controlling owner’s grip on the group at the expense of the minority shareholders.

New developments in the general anti-abuse rules and the impact on international tax planning

The author discusses China's new anti-abuse rules and two recent tax cases involving the application of these rules to stock transfer transactions. The author also discusses the practical impact of these legal and judicial developments and the tax aspects that should be considered when setting up corporate structures and undertaking corporate restructuring activities in China.

Determinants of merger activity: evidence from India

This study investigates the role of industry level factors in determining merger activity in an emerging economy. The study uses information from India, which has witnessed acceleration in merger activity subsequent to recent economic reforms. Departing from the existing literature, we proxy merger activity by the occurrence of mergers and the number of mergers. The results from logistic and count data regressions suggest that growth opportunity, concentration and cash flow are important determinants of merger activity. However, unlike existing studies, no evidence is found to support the role of mergers as a corporate restructuring activity in response to industry shocks.

An analytical approach for making management decisions concerning corporate restructuring

Internal corporate restructuring activities, such as downsizing, sale or termination of a business line, facility closure, consolidation, or relocation, often occur as part of managerial strategies intended to improve efficiency, control costs, and adapt to an ever-changing business environment. Such actions frequently result in fundamental changes in a business's organization, its strategies, its systems, and its operations. They can unsettle a business and often significantly affect current and future earnings and cash flows. In this paper we propose a novel decision-making model through the use of the dynamic programming technique to illustrate how management can determine the optimal timing and appropriate restructuring actions that maximize the benefits of a restructuring program. Copyright © 2006 John Wiley & Sons, Ltd.

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.