Research Question/Issue: We examine the extent to which effective corporate governance impacts three restructuring choices following completed acquisitions – significant adjustment to workforce; sale of subsidiaries; and further acquisitions. We also investigate the relative firm performance in the post-restructuring period for the three respective options examined.
Research Findings/Insights: Based on a sample of 649 US firms between the period 1991 and 2009, we find support for the assertion that corporate governance impacts layoffs and further acquisitions. We, however, find no evidence to support a measurable governance effect on divestiture likelihood. In examining the post-acquisition performance following restructuring, we find no significant difference in performance between acquirers that made further acquisitions and those that did not. There is evidence, however, suggesting that acquirers who laid off workers and those that divested assets performed significantly poorer relative to a comparable group of acquirers.
Theoretical/Academic Implications: This study adds to the empirical literature on the relation between governance and restructuring choices. We provide evidence on the impact of governance on restructuring choices that has not been documented in the academic literature. An implication of this study is that performance in post-restructuring period would not necessarily be enhanced even when governance exerts positive influences on restructuring choice.
Practitioner/Policy Implications: Our empirical results demonstrate the relative importance of corporate governance in organizational strategic choices. This study offers insights to stakeholders interested in enhancing governance structures to influence restructuring decisions following completed bids.
2011. Vol. 19, no 1, 61-76 p.