Return to search

Restructuring Charges: Do Investors Really Care?

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.

Identiferoai:union.ndltd.org:CLAREMONT/oai:scholarship.claremont.edu:cmc_theses-2516
Date01 January 2017
CreatorsRamsey, Liberty Nicole
PublisherScholarship @ Claremont
Source SetsClaremont Colleges
Detected LanguageEnglish
Typetext
Formatapplication/pdf
SourceCMC Senior Theses
Rights© 2016 Liberty N Ramsey, default

Page generated in 0.002 seconds