Shareholder Value and the Transformation of American Industries, 1984-2001
There 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. Using data from 62 industries for 1984-2000, this paper explores empirically the connections between shareholder value strategies such as mergers and layoffs, and related industry-level changes such as de-unionization, computer technology, and subsequent profitability. Mergers occurred in industries 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 displaced workers through layoffs and was focused on reducing unionized work forces. There is no evidence that mergers or layoffs returned industries to profitability. This suggests that shareholder value strategies were not, successful in righting the problems of American business.
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