Shareholder Value and Changes in American Industries, 1984-2000
AbstractThere is now a solid set of results from economic sociologists concerning the spread and implementation of "shareholder value" strategies across publicly held corporations in the United States during the 1980s. Corporations were financially reorganized and used the tactics of selling off unrelated product lines, engaging in mergers with firms in similar industries, various financial ploys such as stock buybacks, and downsizing their labor forces. This paper explores empirically the connections between mergers, layoffs, de-unionization, computer technology, and subsequent industry profitability. Mergers occurred in sectors where economic conditions were not good in line with shareholder value arguments. Mergers subsequently led to layoffs, consistent with the shareholder value perspective that emphasizes that firms needed to deploy their resources more efficiently as they reorganized. There is also evidence that managers who engaged in mergers invested in computer technology. This technology directly displaced workers through layoffs and was focused on reducing unionized work forces. There is no evidence that mergers or layoffs returned industries to profitability. Only industry growth and computer investment led to increased profits. This suggests that shareholder value ideology was not, by itself, successful in righting the problems of American business.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute of Industrial Relations, UC Berkeley in its series Institute for Research on Labor and Employment, Working Paper Series with number qt82j7915n.
Date of creation: 01 Feb 2005
Date of revision:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maryellen R. Kelley, 1994. "Productivity and Information Technology: The Elusive Connection," Management Science, INFORMS, vol. 40(11), pages 1406-1425, November.
- Peter Cappelli, 2000. "Examining the Incidence of Downsizing and Its Effect on Establishment Performance," NBER Working Papers 7742, National Bureau of Economic Research, Inc.
- Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999.
"Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence,"
NBER Working Papers
7136, National Bureau of Economic Research, Inc.
- Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, And The Demand For Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 339-376, February.
- Andrei Shleifer & Lawrence H. Summers, 1987.
"Breach of Trust in Hostile Takeovers,"
NBER Working Papers
2342, National Bureau of Economic Research, Inc.
- Wolff, Edward N, 2002. "Computerization and Structural Change," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(1), pages 59-75, March.
- Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 1998.
"Corporate Ownership Around the World,"
Harvard Institute of Economic Research Working Papers
1840, Harvard - Institute of Economic Research.
- Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
- Mark Montgomery, 1991. "New evidence on unions and layoff rates," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 44(4), pages 708-721, July.
- Benjamin M. Friedman, 1985. "Corporate Capital Structures in the United States," NBER Books, National Bureau of Economic Research, Inc, number frie85-1, July.
- Hammer, Michael & Champy, James, 1993. "Reengineering the corporation: A manifesto for business revolution," Business Horizons, Elsevier, vol. 36(5), pages 90-91.
- Caves, Richard E., 1989. "Mergers, takeovers, and economic efficiency : Foresight vs. hindsight," International Journal of Industrial Organization, Elsevier, vol. 7(1), pages 151-174, March.
- David Card & John E. DiNardo, 2002.
"Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles,"
NBER Working Papers
8769, National Bureau of Economic Research, Inc.
- David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
- Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
- David H. Autor & Frank Levy & Richard J. Murnane, 2002. "Upstairs, downstairs: Computers and skills on two floors of a large bank," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(3), pages 432-447, April.
- Blackwell, David W. & Marr, M. Wayne & Spivey, Michael F., 1990. "Plant-closing decisions and the market value of the firm," Journal of Financial Economics, Elsevier, vol. 26(2), pages 277-288, August.
- Whitley, Richard, 1986. "The transformation of business finance into financial economics: The roles of academic expansion and changes in U.S. capital markets," Accounting, Organizations and Society, Elsevier, vol. 11(2), pages 171-192, March.
- Scherer, F M, 1988. "Corporate Takeovers: The Efficiency Arguments," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 69-82, Winter.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff).
If references are entirely missing, you can add them using this form.