The decision to restructure a firm is very difficult for many companies because it often has a big impact on the company financially and culturally. Restructuring is often a necessary decision for firms in financial distress, and my research seeks to determine whether the market reacts positively or negatively to restructuring charges over time. Much research has been done to determine whether restructuring creates value for the company and increases future performance, but less has been done to determine the stock market reaction that comes as a result of restructuring. Prior literature suggests that restructuring is often a positive decision for companies, which led to my hypothesis that stock price would increase more in companies that had higher levels of restructuring charges over the period measured. I measured companies’ restructuring charges as a percent of operating income over a ten-year period and compared those percentages to the change in stock price over that same period. My results suggest that companies who did not restructure, or recognized lower levels of restructuring charges, had higher positive increases in stock price than those that had higher levels of restructuring charges. Because this result is contrary to much of the prior research, investors’ reaction to restructuring should continue to be studied.

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Firms' operational restructuring involves information relevant to strategic choices as well as future demand and cost conditions. This study examines the relationship between peer firms' restructuring and a company's responsiveness to its growth opportunities. Peer firm restructuring can increase uncertainty with respect to a company's payoffs regarding its investment projects, leading to decreased responsiveness to growth opportunities. Using a large sample of public companies during 2006–2020, I find that peer firms' restructuring is negatively associated with the responsiveness of capital expenditures (Capex) to growth opportunities. The results suggest that peer firms' restructuring activities provide information about a company's investment projects above and beyond industry shocks reflected in changes in industry sales. Furthermore, these associations are moderated by industry competition. The negative effects of peer firms' restructuring on Capex sensitivity are the strongest in high-competition industries.