Corporate Restructuring and Investment Horizons
AbstractThe recent wave of corporate restructuring in the United States has been accused of shortening the investment horizons of U.S. managers. This paper surveys the empirical and case study evidence on restructuring and investment behavior and reaches the following conclusions 1) A large fraction of the restructurings were motivated by synergistic or other efficiency-enhancing reasons and have little to do with investment horizons. 2) However, massive shifts toward debt in the capital structure of manufacturing firms. often induced by hostile takeover threats, are accompanied by reduced investment of all kinds, particularly in a few industries which are characterized by "stable' technology and cost-based innovative strategies. 3) The evidence is consistent with optimizing behavior on the part of firms faced with a lower relative price of debt to equity and a higher overall cost of capital during the nineteen-eighties, but there all still doubts about whether the U.S. market for corporate control elicits the correct level of long run investment. Thus the paper concludes with a discussion of the evidence on cross-country differences in the financing of investment and the market for corporate control and suggestions for future research in this area.
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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3794.
Date of creation: Dec 1994
Date of revision:
Publication status: published as Business History Review, vol 68, Spring 1994, pp 110-143
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
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.:
- Scharfstein, David, 1988. "The Disciplinary Role of Takeovers," Review of Economic Studies, Wiley Blackwell, vol. 55(2), pages 185-99, April.
- Myron S. Scholes & Mark A. Wolfson, 1989.
"The Effects of Changes in Tax Laws on Corporate Reorganization Activity,"
NBER Working Papers
3095, National Bureau of Economic Research, Inc.
- Scholes, Myron S & Wolfson, Mark A, 1990. "The Effects of Changes in Tax Laws on Corporate Reorganization Activity," The Journal of Business, University of Chicago Press, vol. 63(1), pages S141-64, January.
- Albert Ando & Alan J. Auerbach, 1991.
"The Cost of Capital in Japan: Recent Evidence and Further Results,"
NBER Working Papers
3371, National Bureau of Economic Research, Inc.
- Ando, Albert & Auerbach, Alan J., 1990. "The cost of capital in Japan: Recent evidence and further results," Journal of the Japanese and International Economies, Elsevier, vol. 4(4), pages 323-350, December.
- Albert Ando & Alan J. Auerbach, 1989. "The Corporate Cost of Capital in Japan and the U.S.: A Comparison," NBER Working Papers 1762, National Bureau of Economic Research, Inc.
- Stein, Jeremy C., 1988.
"Takeover Threats and Managerial Myopia,"
3708937, Harvard University Department of Economics.
- Cockburn, Iain & Griliches, Zvi, 1988.
"Industry Effects and Appropriability Measures in the Stock Market's Valuation of R&D and Patents,"
American Economic Review,
American Economic Association, vol. 78(2), pages 419-23, May.
- Iain Cockburn & Zvi Griliches, 1987. "Industry Effects and Appropriability Measures in the Stock Markets Valuation of R&D and Patents," NBER Working Papers 2465, National Bureau of Economic Research, Inc.
- Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989.
"Bank Monitoring and Investment: Evidence from the Changing Structure of Japanese Corporate Banking Relationships,"
NBER Working Papers
3079, National Bureau of Economic Research, Inc.
- Takeo Hoshi & Anil Kashyap & David Scharfstein, 1990. "Bank Monitoring and Investment: Evidence from the Changing Structure of Japanese Corporate Banking Relationships," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 105-126 National Bureau of Economic Research, Inc.
- Ben S. Bernanke & John Y. Campbell, 1988. "Is There a Corporate Debt Crisis?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 83-140.
- Hall, Bronwyn H., 1992.
"Investment and Research and Development at the Firm Level: Does the Source of Financing Matter?,"
Department of Economics, Working Paper Series
qt5j59j6x3, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Bronwyn H. Hall, 1992. "Investment and Research and Development at the Firm Level: Does the Source of Financing Matter?," NBER Working Papers 4096, National Bureau of Economic Research, Inc.
- Bronwyn H. Hall., 1992. "Investment and Research and Development at the Firm Level: Does the Source of Financing Matter?," Economics Working Papers 92-194, University of California at Berkeley.
- Ashish Arora & Marco Ceccagnoli & Marco Da Rin, . "Corporate Restructuring and R&D: A Panel Data Analysis for the Chemical Industry," Working Papers 173, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- David A. Butz, 1993. "Debt Financing and Manager-Shareholder Agency Costs," UCLA Economics Working Papers 687, UCLA Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.