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Is the restructuring-performance relationship moderated by the economic cycle and the institutional environment for corporate governance?

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  • Forcadell, Francisco Javier
  • Sanchez-Riofrio, Angelica
  • Guerras-Martín, Luis Ángel
  • Romero-Jordán, Desiderio

Abstract

This study analyses the effect that the institutional environment for corporate governance and the economic cycle have on the relationship between the business portfolio restructuring (BPR) strategy and corporate performance. For this purpose, we use institutional theory, incorporating the notion of organizational slack to highlight the differences in firm performance between institutional settings along the different phases of economic cycle. We found that market-oriented corporate governance systems generate, during a period of economic growth, a smaller positive effect of each particular BPR movement on company performance, compared to network-oriented systems. Additionally, market-oriented corporate governance systems contribute to counteract part of the negative effect of the economic crisis. In contrast, network-oriented corporate governance systems are not able to avoid the potentially negative effect of an economic crisis on this relationship, amplifying the negative effect of the economic crisis on performance. We use data from 15 European countries for the period 1998–2015.

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  • Forcadell, Francisco Javier & Sanchez-Riofrio, Angelica & Guerras-Martín, Luis Ángel & Romero-Jordán, Desiderio, 2020. "Is the restructuring-performance relationship moderated by the economic cycle and the institutional environment for corporate governance?," Journal of Business Research, Elsevier, vol. 110(C), pages 397-407.
    • Handle: RePEc:eee:jbrese:v:110:y:2020:i:c:p:397-407
    DOI: 10.1016/j.jbusres.2020.01.055
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