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The antecedents and consequences of plant closing announcements

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  • Bichescu, Bogdan
  • Raturi, Amitabh

Abstract

Plant closure marks an important episode in the life of a firm. We investigate 222 plant closing announcements spanning a period of seven years, to identify antecedents and consequences of plant closures, as reflected by financial measures of operating performance available on COMPUSTAT. We find that a firm׳s decision to close a plant hinges on dynamics in industry performance and on firm׳s size and age of capital. We provide new evidence that large firms start closing plants first, while small firms resist longer and experience median control-adjusted decreases in sales and return on assets of 8.24% and 12.96%, respectively, over the last two years prior to closure. We find that, relative to a benchmark of industry peers, recovery after closure is generally slow, suggesting that sample firms may be faced with deeper problems that have not been fully addressed by the decision to close a plant.

Suggested Citation

  • Bichescu, Bogdan & Raturi, Amitabh, 2015. "The antecedents and consequences of plant closing announcements," International Journal of Production Economics, Elsevier, vol. 168(C), pages 197-210.
  • Handle: RePEc:eee:proeco:v:168:y:2015:i:c:p:197-210
    DOI: 10.1016/j.ijpe.2015.06.029
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    References listed on IDEAS

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    Cited by:

    1. Manikas, Andrew S. & Patel, Pankaj C., 2016. "Managing sales surprise: The role of operational slack and volume flexibility," International Journal of Production Economics, Elsevier, vol. 179(C), pages 101-116.

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