Audra L. Boone (Penn State University) J. Harold Mulherin (Claremont McKenna College)
Abstract
We study the process of corporate restructuring for a sample of 298 firms during the 1989-98 period that announce that they are considering restructuring alternatives. We find that restructuring is a lengthy process, with the majority of the restructuring period occurring prior to any definitive proposals for corporate change. Only 70 percent of the firms that initially propose restructuring later make a definitive proposal to sell either all or part of the firm, with other firms taking themselves out of play or declaring bankruptcy. Hence, the market reaction to the initial restructuring announcement underestimates the full wealth effects of completed restructurings. The estimate of the full value of restructuring across the sample firms averages 7.5 percent, with the greatest gains of 30 percent accruing to firms that are acquired. The average gain for the full restructuring period for firms divesting a unit is 5 percent, which is roughly double that estimated for the initial announcement in prior studies of corporate divestitures.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
References listed on IDEAS 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.:
Cited by: (explanations, 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.)