Interaction Effects of Restructuring Decisions on Operating Profit Following Performance Shocks

38 Pages Posted: 11 Sep 2008 Last revised: 26 Sep 2008

See all articles by Alfred Yawson

Alfred Yawson

University of Adelaide; Financial Research Network (FIRN)

Date Written: September 8, 2008

Abstract

This paper examines the interaction effects of restructuring activities for a sample of Australian firms experiencing significant declines in operating performance. Our sample firms respond to performance shocks with both financial and corporate restructuring and they achieve significant improvements in operating profits in each of the first three years following the shocks. We find that financial and corporate restructuring have both contemporaneous and lagged impact on operating performance. Most importantly, we show that the interaction of restructuring events has a strong influence on the corporate recovery process. We conclude that financial and corporate restructuring play complementary as well as interactive role in reversing a declining trend in operating profits.

Keywords: Operating performance, Restructuring actions, Interaction effects, Performance shocks

JEL Classification: G32, G34

Suggested Citation

Yawson, Alfred, Interaction Effects of Restructuring Decisions on Operating Profit Following Performance Shocks (September 8, 2008). Journal of Economics and Business, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1265374

Alfred Yawson (Contact Author)

University of Adelaide ( email )

No 233 North Terrace
Adelaide, South Australia 5005
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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