An Analysis of the Restructuring of Corporate America
During the past decade, numerous American companies have restructured their operations in an attempt to remain competitive in a global marketplace. This thesis focuses on corporate restructurings that involve a substantial reduction in a firm's labor force. A restructuring is defined as a reduction of five percent or more in a firm's labor force. This thesis addresses two questions relevant to firm restructuring: 1.) what motivates the firms to restructure their operations 2.) what happens to a firm's performance following a restructuring. The results of the analysis indicate that firms that have declining profitability ratios that fall below industry averages for two consecutive years restructure and incur an additional year of below industry average profitability. One year following the restructuring however, profitability ratios improve dramatically. The second year following restructuring indicates a return to industry averages.