Corporate Restructuring: Reconfiguring the Firm

Author(s): Edward H. Bowman and Harbir Singh

Source: Strategic Management Journal, Vol. 14, Special Issue: Corporate Restructuring
(Summer, 1993), pp. 5-14
Published by: Wiley
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 Strategic Management Journal, Vol. 14, 5-14 (1993)

CORPORATE RESTRUCTURING: RECONFIGURING

THE FIRM
EDWARD H. BOWMAN AND HARBIR SINGH
The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania, U.S.A.

Corporate restructuring is an area of great interest to researchers in corporate strategy,

finance and organizational studies. In this chapter, we briefly review prior research on
corporate restructuring, and then introduce the articles in the special issue. In the papers
in the issue there are indications that restructuring can be performance-enhancing for the
firm, but it can also have significant unintended consequences. The papers in this issue
apply a broad range of research methods and theoretical perspectives to corporate
restructuring, its initiating forces, and its consequences.

Corporate restructuring is an area of great interest most recent merger wave and the previous ones
to corporate strategy, finance and organizational is one of scale: the target for takeover has often
scholars. Aspects of restructuring have been been the large corporation, and the rationale
central to each field-for instance, the competi- advanced for many transactions is the search for
tive implication of changes in the firm's business greater efficiency through downsizing the firm.
portfolio have been central to research in Unlike the highly acquisitive period in the late
corporate strategy, while the effectiveness of sixties, the eighties have been marked by high
organizational structure changes has been levels of acquisitions, divestitures and buyouts
addressed in organization theory. Despite con- (see Bowman and Singh, 1990, for further
siderable research on aspects of restructuring, discussion). It is clear that the impact of
the relationship between restructuring and its restructuring has been felt in almost every sector
consequences for the firm and its stakeholders is of the U.S. economy. The reconfiguration of
unclear. A plausible explanation for this lack of European corporations in response to changes
consensus is that restructuring is a complex and in European markets suggests high levels of
multidimensional phenomenon. This Special Issue restructuring activity in many key areas.
presents research into various dimensions of In this introductory paper, we present an
corporate restructuring and its consequences. overview of the articles included in the Special
Although restructuring has gained great sali- Issue and a synopsis of executive presentations
ence in recent years, the sale of businesses or made at the Wharton School in the associated
acquisitions of other corporations is not new to conference, sponsored by the Reginald H. Jones
corporate America. The merger wave of the Center. Overall, this issue represents the state
1980s was the fourth since the beginning of this of art on corporate restructuring and will help
century. The principal difference between the to set the agenda for future research in the area.

Key words: Corporate restructuring, organizational

restructuring, financial restructuring, reconfiguration

0143-2095/93/050014-10$10.00
(? 1993 by John Wiley & Sons, Ltd.

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6 E. H. Bowman and H. Singh

CORPORATE RESTRUCTURING: THE not be as pervasive as the frequency of restructur-

PRESENT CONTEXT ing activity indicates. Capital gains arising from
the sale of assets to more synergistic or related
Restructuring can encompass a broad range of acquirers than the parent corporation appear
transactions, including selling lines of business or to be a less controversial source of gain in
making significant acquisitions, changing capital restructuring than claims of new-found oper-
structure through infusion of high levels of debt, ational efficiency. This has led to the argument
and changing the internal organization of the that the firm should only participate in businesses
firm. Business portfolio restructuring may occur at which it excels due to a shared core competence
through the sale of lines of business, which are or other specialized resource (see Singh, 1993).
seen as peripheral to the long-term strategy of In a study of the stock market's reactions to
the firm (see Singh and Chang, 1992, for the corporate restructuring announcements in the years
performance implications of corporate 1981-87, we found that the announcements were
reconfiguration). Restructuring can also involve not associated with significant abnormal returns,
a sequence of acquisitions and divestitures to on average (Bowman and Singh, 1993). We
develop a new configuration of the lines of included all three dimensions of restructuring-
business of the corporation. Capital structure portfolio, organizational and financial-in the
changes usually involve the infusion of large study. Three possible interpretations of the nonsig-
amounts of debt to either finance leveraged nificant average returns from restructuring are:
buyouts or to buy back stock from equity (a) restructuring announcements per se are not
investors, or to pay large one-time dividends. credible unless prior events have occurred to signal
Organizational restructuring is intended to a coherent strategy for change, (b) that the
increase the efficiency and effectiveness of restructuring does not have any impact on future
management teams through significant changes income, or (c) investors may have anticipated the
in organizational structure, often accompanied restructuring event prior to the announcement, so
by downsizing. Restructuring involving mainly that no new information was presented in the
organizational structure change is often announcement. We prefer the first interpretation,
accompanied by asset disposal or acquisition. because restructuring involves sweeping changes in
Corporate rhetoric about the motives behind the firm's portfolio, organization or capital struc-
the somewhat drastic action of restructuring typi- ture, which should have some effects on future
cally cites productivity enhancements, cost controls income. To explore the issue further, we related
and other actions designed to maximize shareholder the stock market's reaction to restructuring
wealth. The financial press provides high visibility announcements with critical organizational and
to such assertions, in prominent feature articles in strategic changes in the firm in a period up to 2
popular business publications. The sources of gains years prior to the restructuring. We found that
in the postrestructuring phase may be due to sale significant organizational changes were positively
of assets, operational efficiencies, or at times to a associated with abnormal returns related to restruc-
new concept of the business.1 turing. These results suggest that the stock market
Rhetoric about newly discovered sources of considers a restructuring announcement as credible
shareholder benefit is challenged by skeptics, (in terms of its impact on future income) if the
who adopt the position that if managers as agents firm has made significant organizational changes
of stockholders were performing their roles to prepare itself for restructuring. The positive
effectively, such pockets of undervaluation would association between prior organizational changes
and restructuring announcements indicates that
I An example of the latter idea of redefinition of the business restructuring has to be preceded with significant
exists in the retailing industry, where acquirers such as organizational change for the announcement to be
Campeau Corporation valued companies in part based on
favorably interpreted by investors.
their real estate holdings-yielding considerably higher
valuations than that obtained through the discounted stream
of future cash flows from traditionally defined retailing
operations. The subsequent bankruptcy of Campeau's Feder- Managerial perspectives on restructuring
ated Department Stores creates doubts about whether
redefinition of the firm's businesses can result in sustainable At the Wharton Conference on Corporate
changes in the firm's valuation. Restructuring, three senior executives presented

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 Corporate Restructuring 7

their views on challenges faced by managers. Dr. as part of the adaptation of the firm to the
Blaine Davis, Corporate Vice President for environment.
Strategy at AT&T, Dr. James Emshoff, CEO of Ongoing restructuring was also the theme of
Indecap Enterprises (and former President of Dr. James Emshoff's remarks. Dr. Emshoff
Citicorp, Diners Club) and Mr. Gene Remoff, suggested that restructuring is the major manage-
Vice President of Human Resources at ARA ment challenge of the 1990s. Several factors
Services spoke at the conference. converge to make restructuring the dominant
Dr. Blaine Davis discussed the postderegu- concern of top management. There is an ongoing
lation changes at AT&T after 1984. On January conversion of the economy to a service orien-
1, 1984, the company's revenues dropped by tation. International competition also has forced
more than 50 percent, its employment base by firms to downsize their operations to keep their
62 percent and its asset base by 70 percent, costs in line with competition. There is also a
because of the breakup of the predecessor deintegration of organizations occurring because
company into the successor AT&T and the of the rise of networking relationships between
operating companies. Although these figures the firm and its affiliates, Emshoff argued that
are misleading in the sense that assets were in many service industries, restructuring has
reallocated into the various successor companies, been very prevalent due to the delayering of
the perception of change at the level of top organizations. Because of the pervasiveness of
management was not unlike the very radical restructuring in service industries, firms which
downsizing presented above. From 1984 to 1990, are better prepared to take restructuring in their
there was a further downsizing of AT&T by stride will be better off than those which are
100,000 employees, to a total of 275,000 forced into it by crises.
employees, the size that exists today. In the Voluntary restructuring in the postbuyout firm
course of this downsizing, there were several was the theme of the presentation by Gene
new initiatives to restructure the organization. Remoff, of ARA Services (a major corporation
In post-1984 era, there have been three CEOs: which went private through a management buyout
Charles Brown, 1984-86, James Olson, 1986-88 in 1984). Remoff discussed how human resource
and Robert Allen, 1988-present. Brown broke management mirrored the new incentive structure
up the previous (prederegulation) centralized in the postbuyout firm after 1984. After the
management system, and Olson consolidated the financial restructuring, managers were very will-
company into 21 SBUs. Allen, in the period ing to undertake portfolio restructuring to
after 1988, has consolidated the 21 SBUs into redeploy the assets of the firm. In effect, after
four groups. AT&T has made large numbers of the buyout, a heightened emphasis on cash flow
acquisitions and alliances in the post-1984 period, enabled the firm to reduce its diversification by
with an explicit emphasis on building new selling off peripheral operations. The sale of
capabilities to compete in new product and assets facilitated the paydown of debt, and
geographic markets. The most salient move was the firm's equity value has increased through
the acquisition of NCR, with objective of operational efficiencies generated after the buy-
providing AT&T with a strong platform in out. Success following the buyout resulted in a
computer hardware and revitalizing AT&T's substantial increase in the number of managers
preexisting computer operations. with equity in the firm. The overall message of
The impact of AT&T's restructuring has been Remoff's presentation was that for firms in
positive from a shareholder value perspective, mature businesses with high levels of stable cash
with a doubling of income between 1984 and flow, a management buyout can be an effective
1991. From the point of view of employment, restructuring mechanism.
there has been a 33 percent decline in workforce, In sum, the managerial presentations at
and a major cultural change in the corporation, the conference indicated that decisions about
towards a more market-driven orientation. From restructuring have become a major part of
a top management point of view, there has been long-term strategic planning. The presenters
rapid progress into new markets, but accompanied believed that restructuring can be managed
by a sense that restructuring will be an ongoing effectively, but that there can be significant
process but with more of an incremental flavor, negative consequences associated with poorly

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8 E. H. Bowman and H. Singh

managed restructuring programs. Managerial As shown in Table 2, the papers in this issue
approaches to restructuring correspond well to use a range of research methods, data sources
the 'crafting' metaphor of strategic decision- and theoretical lenses to study the phenomenon
making (Mintzberg, 1987), in the sense that of corporate restructuring. Theoretical lenses
many adjustments appeared to be necessary used in the articles in this issue range from
after the initial commitment to restructuring. agency theory (used or referenced by many
It was also clear from the postbuyout firm of the articles) to theories about employee
(ARA Services) that the management buyout motivation in the face of organizational change.
resulted in sweeping changes in the firm, in Research methods range from experimental
terms of its business portfolio, organizational methods to empirical designs involving archival
structure, incentives and human resource strat- data and pooled cross-sectional and time series
egy. Overall, the presentations underscored data. Units of analysis range from the corpor-
the multidimensionality of restructuring and ation to individual managers. The range of
emphasized the need to consider the conse- theories, methods and data sources highlights
quences of restructuring for competitive advan- the richness of the domain of corporate restruc-
tage, performance and stakeholders. turing. The diversity of theoretical lenses also
points to the multidimensionality of restruc-
turing.
PAPERS IN THE ISSUE

In Table 1, we list the papers in this Special PORTFOLIO RESTRUCTURING

Issue in terms of their focus on portfolio,
organizational or financial restructuring. As is Portfolio restructuring involves significant
clear from the table, the set of papers is quite change in the firm's configuration of lines of
well balanced along the three dimensions of business through acquisition and divestiture
change we discussed earlier. Many of the transactions. There has been extensive research
papers address more than one dimension of on acquisitions, and a smaller but internally
restructuring. Also, the set of articles covers a consistent amount of research on corporate
broad range of restructuring events-from divestitures. Research on acquisitions and
leveraged buyouts, in the case of Long and divestitures, as vehicles for portfolio restructur-
Ravenscraft, to the reconfiguration of vertically ing, can contribute to our understanding of the
integrated organizations into networks of coop- overall phenomenon. However, we need to
eration among independent organizations, in insert the caveat that as a combination of
the case of Robins. several transactions, the effects of portfolio

Table 1. Focus of the articles in the special issue

Portfolio Organizational Financial Consequence measures

Bethel/Liebeskind X Incidence of restructuring

Johnson/Hoskisson/Hitt X X Incidence of restructuring
Gibbs X X Incidence of restructuring
Hurry X Accumulating resources
Zajac/Kraatz X X Operating performance
Robins X X Economic performance
Long/Ravenscraft X X R&D investment, economic
performance
Cannella/Hambrick X X Management turnover, economic
performance
Brockner/Grover/O'Malley/Reed/Glynn X Work motivation
Reilly/Brett/Stroh X Employee satisfaction/loyalty

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 Corporate Restructuring 9

Table 2. Articles in the Special Issue: Method and theory

Paper Class of method Data source Theoretical lens

Bethel/Liebeskind Large sample design; Secondary Agency theory

cross section and time
series

Johnson/Hoskisson/Hitt Large sample Primary and Agency and upper

secondary- echelon theory
questionnaire and
archival

Gibbs Large sample Secondary-archival Agency theory

Hurry Theory building Secondary Options theory

Zajac/Kraatz Large sample design; Secondary Organizational adaptation

pooled cross-sectional
and time series

Robins Longitudinal, selected Secondary-archival Internalization theory

firms

Long/Ravenscraft Large sample design; Secondary Agency theory and capital

cross-section and time market imperfection
series arguments

Cannella/Hambrick Large sample Primary-questionnaire Upper echelon theory

Brockner/Grover/ Experimental Primary Employee motivation

O'Malley/Reed/Glynn

Reilly/Brett/Stroh Large sample of middle Primary-questionnaire Psychological contracts

managers and organizational
change

restructuring on financial performance go include management turnover, there is evidence

beyond the individual moves comprising the of significant turnover many years after the
program. event (Walsh, 1988). The paper by Cannella and
In the area of corporate acquisitions, it is Hambrick explores how management turnover
now a well-known result that stock market following an acquisition affects performance of
returns to acquirers are, on average, small and the acquired firm. Turnover of executives after
not statistically significant (Jensen and Ruback, acquisition is related to lower performance of
1983; Bradley, Desai, and Kim, 1983). Disaggre- the acquired firm, suggesting that postacqui-
gating the total set of acquisitions into related sition management is an important determinant
and unrelated transactions (with various proxies of success of an acquisition.
for relatedness used in different studies) yields Interpreting restructuring in terms of changes
no consistent pattern of significant returns to in the firm's business portfolio, Hurry presents
acquirers (Chatterjee, 1986, Lubatkin, 1987, a formulation of the firm's evolution in terms
Singh and Montgomery, 1987). There is some of investment in real strategic options. Using
evidence that related acquisitions may be this perspective, Hurry argues that strategic
associated with lower levels of systematic risk alliances between U.S. and Japanese firms can
than unrelated acquisitions. In sum, although be interpreted as real strategic options, resulting
acquisitions are effective vehicles to change the in future reconfiguration of the firms involved.
portfolio of the firm, their effects on financial Over time, Japanese partners in the alliances
value of the firm are unclear. If we broaden discussed by Hurry use their alliances with
the organizational consequence measures to U.S. partners as call options to restructure

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10 E. H. Bowman and H. Singh

their portfolios, while their U.S. partners payments would force managers to focus on
use the alliance as put options for financial their core businesses, and not squander cash
restructuring. flows from the core businesses in presumably
Bethel and Liebeskind study the effects of less rewarding diversification projects. The
the firm's ownership structure on corporate argument is most applicable in mature industries
restructuring initiatives in large firms during in which key success factors are very clear and
1981-87. They find that pressure to restructure where investments on research and new business
the firm came from blockholders, whose owner- development are not substantial enough to
ship of the firm's stock is positively associated absorb all the free cash flow (Jensen, 1989).
with downsizing and refocusing of the firm's An important vehicle for financial restructuring
operations. Increased levels of institutional was the management buyout, in which manage-
stockholding are positively related to growth ment teams, in conjunction with investor
but not increased diversification. Their results groups, borrowed large amounts of money to
are consistent with an agency theoretic expla- buy the firm from the public stockholders and
nation of corporate refocusing initiatives. take it private. The assumption was that taking
Johnson, Hoskisson, and Hitt investigate the firm private allowed managers to get high
the role of corporate boards in initiating equity positions within the firm, which in turn
restructuring. They find that outsider represen- motivated them to minimize wasteful financial
tation on corporate boards is positively associ- practices in the firm. An alternative to manage-
ated with corporate restructuring. Emphasis ment buyouts was the leveraged recapitali-
on strategic controls is negatively associated zation, which did not result in the firm going
with board-initiated corporate restructuring. private, but also represented infusion of large
Increased equity stakes of managers and board amounts of debt in the firm.
members are negatively associated with restruc- Long and Ravenscraft address the investment
turing. Their study of restructuring initiatives strategy of the leveraged firm in their paper.
indicates that board involvement in restructur- They address the controversy regarding the
ing is higher when controls on managerial removal of key slack resources in the firm as a
decisions and performance are not tied effec- response to excessive leveraging (Lowenstein,
tively to strategy and when managerial equity 1985). Investment in research and development
stakes in the firm are relatively low. is a key area of strategic investment, and one
Zajac and Kraatz investigate strategic and which can best typify the costs of excessive
organizational change in the higher education leverage. Long and Ravenscraft find that firms
industry. Using longitudinal data over the last tend to spend less on R&D following a buyout
two decades, they show how colleges have than their industry average. Further, R&D
restructured their degree programs in response expenditure drops by about 40 percent after an
to environmental change. They show that LBO. However, they also find that R&D-
portfolio restructuring for these colleges is a intensive LBOs outperform their publicly held
predictable, common and performance-enhan- (non-LBO) peers in their respective industries.
cing response to changes in their environments. Post-LBO performance is higher by about 15
The study underscores the interconnection percent on average than pre-LBO performance.
between changes in the business portfolios of The implication of the work is that LBOs do not
service organizations and the organizational pose a long-term public policy problem.
dimensions of restructuring. Gibbs studies the relative importance of free
cash flow, takeover threats, and corporate govern-
ance (board composition and concentration of
FINANCIAL RESTRUCTURING equity ownership) in determining financial and
portfolio restructuring. All three of the forces
An approach to restructuring that received a listed above influence financial restructuring.
lot of attention in the 1980s was the assumption Financial restructuring is equally explained by
of large amounts of debt by public corporations. free cash flow and by corporate governance
This assumption of debt was driven by the indicators. On the other hand, portfolio restruc-
notion that the pressure of high interest turing is not influenced by free cash flow, but

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 Corporate Restructuring 11

is influenced by takeover threat and by the program of restructuring (succession is explicitly

governance structure of the firm. The results of mentioned by Tushman and Romanelli).
the research suggest that free cash flow is The papers in this issue present new insights
one of several forces influencing corporate on organizational restructuring. Zajac and
restructuring, the others being the governance Kraatz, in their study of the restructuring of
structure of the firm and the incidence of colleges in response to environmental changes
takeover threats. in the past 20 years, show that in fact
restructuring is beneficial to organizations.
Indeed, colleges that do not change perform
worse than those that restructure by adding
ORGANIZATIONAL RESTRUCTURING new professional degree programs. Zajac and
Kraatz conclude that restructuring is a common
In the area of organizational restructuring, much and predictable response to radical changes in
prior work emphasizes the ineffectiveness of the environment.
restructuring. Hannan and Freeman (1984) pro- Robins also addresses organizational restruc-
pose that restructuring in general is disruptive turing in response to radical change in the
and, thus, that it increases the rate of corporate firm's environment. Using data on the film
failure. They argue that the selection pressures production industry after World War II, Robins
of population ecology reward organizations for compares the performance of independent film
being reliable and accountable. Thus, the attempt productions with films produced internally by
to adapt to environmental changes, particularly a major studio. Using a sample of 393 films,
through corporate overhaul, increases the firm's Robins finds that independent films had higher
probability of failure ceteris paribus. average performance than studio films, but also
This line of argument is furthered by Ambur- had a different and higher cost structure. Thus,
gey, Kelly, and Barnett (1990) who argue that the primary motive for studios to contract out
change is hazardous because it destroys, by production to independents was to secure new
definition, some of the firm's existing practices. types of products, rather than to seek the most
This destruction, they argue, must be efficient means of production. The implication
accompanied by a loss of corporate competence is that outsourcing of production constituted a
due to the abandonment of familiar 'routines'. strategy shift on the part of the studio not only
Another proposition in this regard is that the search for a more efficient means of
reorganization may 'disrupt relationships with production given a specific strategy. Addition-
external actors that organizations need to survive' ally, the Robins paper shows how organizational
(Anderson, 1991: 4). Anderson cites the example restructuring was an effective response to
of Saatchi & Saatchi's loss of advertising cus- environmental change, and it was accompanied
tomers allegedly as a result of its mergers. This by a shift in strategy and the firm's business
disruption of key external relationships, if it portfolio.
occurs, is detrimental to the firm because such The paper by Brockner et al., addresses the
relationships are difficult to build and need impact of layoffs on employee motivation and
consistency and care to maintain them. worry about future layoffs. They find, using
There is variation in the way authors view two different studies, that survivors' reactions
the negative effects of restructuring on perform- to layoffs depend upon the threat of future
ance. Amburgey et al. (1990), for example, layoffs and their self-esteem. Employees with
claim that 'like a powerful elixir, organizational lower self-esteem tended to worry more and
change may be deadly-but if survived may work harder in the presence of a significant
promise good health.' They therefore suggest threat of future layoff. High self-esteem
a greater hazard of failure in the near term employees did not worry more or work harder
following organizational restructuring, but good under conditions of high threat of future layoff.
performance if the hazardous period is success- High self-esteem employees may be more
fully weathered by the firm. Tushman and responsive to other factors than the threat of
Romanelli (1985) and Amburgey et al. (1990), future layoff, such as their long-term career
suggest that effectiveness is related to a coherent opportunities in the firm. For low self-esteem

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12 E. H. Bowman and H. Singh

employees, the higher level of motivation in product base, going for broader market cover-
response to the threat of future layoff may age through this vehicle, rather than efficiency.
come at the hidden cost of excessive worry. Thus, fairly radical organizational changes
The paper by Reilly, Brett, and Stroh addresses accompanied business portfolio shifts in these
the effect of corporate turbulence on managers' organizations, without dire economic conse-
attitudes towards their jobs and careers based quences to the organizations involved.
on a survey of middle managers in 49 business In the area of financial restructuring Long
units of 17 large corporations. They find that and Ravenscraft discuss R&D spending in post-
organization breakup is positively associated with LBO firms, and indicate that in fact post-LBO
career loyalty (as opposed to company loyalty), firms have better operating performance after
as is financial restructuring. Growth is positively buyout. Also, firms with high levels of R&D
associated with career loyalty and with job spending after buyout tend to perform better
involvement. The implication is that managers than their industry peers. Thus, financial
have realized that the high corporate turbulence restructuring, when accompanied with invest-
they have witnessed is likely to continue. As a ment in key strategic activities, can be effective
result, they are prepared to change organizations, for the firm.
and have therefore focused more on their careers. Hurry, in an options formulation of restruc-
In particular, younger managers have high levels turing, represents alliances as option invest-
of career loyalty and place a lower premium on ments by both partners. Alliances can be real
job security than more experienced managers. strategic call options (to be scaled up in
An implication is that if the economy improves, the event of a positive future outcome) for
firms may note a high level of turnover among restructuring the portfolio of one partner, and
their managers, who were waiting for better can be a put option (in the event of a poor
times to look for new opportunities. financial outcome) for the other partner. Thus,
Overall, the research presented in this issue an options formulation of alliances can be
reports on patterns of organizational restructuring precursors to larger scale restructuring moves
that can be effective for the firm. The research by parent firms, as uncertainty about pay-offs
also shows some of the consequences of organi- is resolved.
zational restructuring on employee motivation In a study of the incidence of restructuring,
and career loyalty. Bethel and Liebeskind point out that block-
holder ownership is significantly correlated with
corporate restructuring, specifically downsizing
of the firm. Their findings also indicate that
CONCLUSION institutional ownership in the firm is positively
associated with the expansion of the firm, while
After reviewing the various approaches taken in insider ownership is not related to the incidence
researching elements of corporate restructuring, of restructuring. This research underscores the
we note the high level of diversity in theories importance of linking the ownership structure
and in research questions investigated in each of the firm to restructuring.
area. Despite the variety, there are some Gibbs, in his study of the incidence of
common threads. restructuring, finds that free cash flow in the
Several papers in the issue show how restruc- firm leads to financial restructuring, and firms
turing can in fact be a successful adaptation of with more outsiders on their boards are less
the firm to its environment. Zajac and Kraatz likely to restructure financially. The impli-
show how institutions of higher learning (not cations of Gibbs' work complement those of
known to be the most fluidly adaptive of Bethel and Liebeskind, in that the extent of
organizations in general) which adapted success- board independence from insiders and the
fully to changing educational needs of the magnitude of free cash flow contribute to
student population performed better than those financial restructuring of the firm.
that did not. Similarly, Robins discusses how Several areas of extension are suggested by
major film studios began to outsource film the papers published in this issue. The papers
production from independents to broaden their represent very strong efforts to profile financial,

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 Corporate Restructuring 13

organizational and portfolio restructuring. More ACKNOWLEDGEMENTS

work is needed to determine the conditions
under which firms can effectively restructure We wish to thank the Reginald H. Jones
its organizational structure and its business Center for Management Policy, Strategy and
portfolio. Organization at the Wharton School for its
Referring to Table 1, we note that the papers support in funding the support work for this
used a range of outcome measures to document Special Issue and associated conference. We
the effects of restructuring on the firm. The thank the panel of reviewers for the Special
diversity of outcome measures attests to the Issue for their outstanding efforts to make the
multidimensional consequences of restructur- issue possible. We also thank Dan Schendel
ing. An area that needs further attention is the for giving us the opportunity to edit this Issue.
effect of restructuring on stakeholders such as
employees and communities. The papers by
REFERENCES
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