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An analytical approach for making management decisions concerning corporate restructuring

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  • Beixin Lin

    (Department of Accounting, Law, and Taxation, Montclair State University, 1 Normal Ave., Montclair, NJ 07043, USA)

  • Zu-Hsu Lee

    (Department of Management and Information Systems, Montclair State University, NJ, USA)

  • Richard Peterson

    (Department of Management and Information Systems, Montclair State University, NJ, USA)

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    Abstract

    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.

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    File URL: http://hdl.handle.net/10.1002/mde.1302
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

    Volume (Year): 27 (2006)
    Issue (Month): 8 ()
    Pages: 655-666

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    Handle: RePEc:wly:mgtdec:v:27:y:2006:i:8:p:655-666

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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    1. Jensen, M.C. & Murphy, K.J., 1988. "Performance Pay And Top Management Incentives," Papers, Rochester, Business - Managerial Economics Research Center 88-04, Rochester, Business - Managerial Economics Research Center.
    2. Berger, Philip G. & Ofek, Eli, 1995. "Diversification's effect on firm value," Journal of Financial Economics, Elsevier, Elsevier, vol. 37(1), pages 39-65, January.
    3. John, Kose & Ofek, Eli, 1995. "Asset sales and increase in focus," Journal of Financial Economics, Elsevier, Elsevier, vol. 37(1), pages 105-126, January.
    4. Denis, David J. & Kruse, Timothy A., 2000. "Managerial discipline and corporate restructuring following performance declines," Journal of Financial Economics, Elsevier, Elsevier, vol. 55(3), pages 391-424, March.
    5. Dann, Larry Y. & DeAngelo, Harry, 1988. "Corporate financial policy and corporate control : A study of defensive adjustments in asset and ownership structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 20(1-2), pages 87-127, January.
    6. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, American Economic Association, vol. 76(2), pages 323-29, May.
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