Operational Restructuring Charges and Post‐Restructuring Performance*

Rowland Kwame Atiase · David E. Platt · Senyo Y. Tse

65 citations0/0 files storedContemporary Accounting Research

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Organizational Downsizing and Restructuring Corporate Finance and Governance Auditing, Earnings Management, Governance

Abstract

Abstract Firms incur restructuring charges as a result of actions intended to improve their operating performance. However, there is little evidence on whether restructuring charges are associated with improved performance. We examine a sample of firms reporting restructuring in 1991‐93 and find that the restructuring firms' earnings increase over the levels immediately before restructuring. Compared with a control sample of firms that report no restructuring, the restructuring firms improve their earnings and operating income, but evidence for improvements in cash flow from operations is mixed. In regression analysis, we find that restructuring charges are significantly positively associated with post‐restructuring changes in earnings relative to the restructuring year, but this association is largely driven by firms with multiple restructurings and firms reporting losses in the restructuring year. We find no association between restructuring charges and post‐restructuring changes in earnings relative to the year before restructuring. Restructuring charges are significantly positively associated with post‐restructuring changes in operating income and cash flow from operations for firms with multiple restructurings. In summary, restructuring charges are associated with improved earnings, but our results suggest that restructuring in the early 1990s did not necessarily guarantee improved operating performance.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 65 citations exist upstream.

References

1996Detecting abnormal operating performance: The empirical power and specification of test statistics 1997The Operating Performance of Firms Conducting Seasoned Equity Offerings 1996Causes and Effects of Discretionary Asset Write-Offs 1988Write-Offs As Accounting Procedures to Manage Perceptions 1996Repeated Accounting Write-Offs and the Information Content of Earnings 1987Asset Writedowns: Managerial Incentives and Security Returns 1992The Voluntary Restructuring of Large Firms In Response to Performance Decline 2002Do Firms Use Restructuring Charge Reversals to Meet Earnings Targets?

Cited by

2010Layoffs and Chief Executive Officer (CEO) Compensation: Does CEO Power Influence the Relationship?2011Do managers use earnings guidance to influence street earnings exclusions?2017Tangible Long-Lived Asset Impairments and Future Operating Cash Flows under U.S. GAAP and IFRS 2008Operational restructuring: reviving an ailing business 2005The Performance Consequences of Operational Restructurings

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.