Responsible Restructuring

2The Financial Consequences of Alternative Restructuring Strategies

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Employment downsizing is not the only way to restructure, although it certainly is a popular strategy. Managers often assume that it will lead to improvements in financial performance. The research presented here tests that assumption.

Are companies better off financially after restructuring? To address this question, two colleagues (one from finance, one from marketing) and I studied financial and employment data from companies in the Standard & Poor’s 500 (the S&P 500) from 1982 to 1994. The S&P 500 is one of the most widely used benchmarks of the performance of U.S. equities. It represents leading companies in leading industries, and consists of 500 stocks chosen for ...