Corporate restructuring : an investigation of antecedents to divestitures and leveraged buyouts

Abstract

Corporate restructuring of publicly owned firms has recently become a common occurrence. The magnitude of restructuring events, both in terms of value and actual numbers, indicate corporate restructuring is, and has been, an important corporate activity. According to Ravenscraft (1987), 38% of all merger and acquisition announcements between 1983 and 1986 were divestitures. Additionally, complex types of corporate restructuring, including leveraged buyouts (LBOs), spin-offs, equity carve-outs, etc., have become more common and no longer represent only the most extreme forms of corporate restructuring. That is, simple divestitures are not the only types of restructuring that firms engage in relative to downsizing and strategic reorientation. Other types of restructuring are becoming increasingly important components of the general phenomena associated with corporate restructuring. The purpose of this dissertation was to investigate two important research questions relative to corporate restructuring. First, are specific types of restructuring related to organizational characteristics and second, what is the nature of these relationships? Hypotheses were developed through integration of theoretical perspectives that are relevant to corporate restructuring. Perspectives included agency/governance, managerial characteristics and resource availability. Operating performance and total diversification were control variables. Modes of restructuring included in this research are "voluntary" divestitures and LBOs which represent different types and are likely to have different antecedents. Logistic regressions and path analytic techniques were employed to evaluate the data. The results of the analyses indicated that variables associated with each of the aforementioned perspectives were significant predictors of the occurrence of LBOs versus divestitures. In addition to performance and diversification, other significant predictors were ownership concentration, managerial experience and firm age...