Abstract
The purpose of this research is to examine the question of who initiates restructuring, the board or top management. The proposed model of who initiates restructuring incorporates organizational economics (agency theory and the market for corporate control literature) and strategic management theory (external and internal contingencies). Based on the integration of the aforementioned research streams, the decision of who initiates restructuring and when it is initiated is contingent on the governance devices in operation. Internal control and governance mechanisms used by the board to monitor top management, the controls used by managers to process information, manager and board member equity stakes, and board structural variables such as board composition, size, and tenure affect the decision process. The model posits that top management can initiate restructuring at any time whereas the board becomes involved when performance suffers. Given that board pressure to restructure the firm is inadequate to force restructuring, board initiated restructuring (CEO dismissal) becomes more probable. The aforementioned factors are hypothesized to affect board and managerial action. Results suggest that board and CEO equity are negatively related to board initiated restructuring (CEO dismissal) while board structural variables such as board composition and board member tenure are positively related to board initiated restructuring. Managerial emphasis on strategic controls was found to be negatively related to board involvement and board initiated restructuring. These results suggest that equity holdings on the part of management and the board and emphasis on strategic controls may lead to manager initiated restructuring. This research also suggests that board-initiated restructuring occurs at a significantly lower level of performance than does manager-initiated restructuring. Future research might focus on finer-grained measures of board involvement and board composition...
Johnson, Richard Alan (1992). Who initiates restructuring : the effects of managerial versus board controls and characteristics. Texas A&M University. Texas A&M University. Libraries. Available electronically from
https : / /hdl .handle .net /1969 .1 /DISSERTATIONS -1348966.