TY - JOUR
T1 - The roles of closure and selloff in corporate restructuring
AU - Ushijima, Tatsuo
AU - Iriyama, Akie
N1 - Publisher Copyright:
© 2015 Elsevier Inc.
PY - 2015/12/1
Y1 - 2015/12/1
N2 - This paper compares the roles of closure and selloff in corporate restructuring, by examining 749 Japanese firms engaged in these two types of divestment activities in the 1990s and 1146 subsidiaries divested by these firms. For closure, we find that (1) divesting firms tend to be less profitable than non-divesting firm, (2) divested subsidiaries have characteristics suggestive of inefficiencies, and (3) divesting firms' profitability improved after the closure, albeit slowly. The results suggest that firms employ closure mainly to discontinue inefficient operations. For selloff, in contrast, we find that (4) divesting firms are no less profitable than non-divesting firms, (5) divesting firms' profitability did not change but their investment intensity increased substantially around the divestiture, and (6) divested subsidiaries had characteristics of high salability and separability. The results suggest that selloff is used to raise funds for the remaining parts of divesting firm. Overall, our results suggest that closure and selloff play heterogeneous roles in the restructuring of Japanese firms.
AB - This paper compares the roles of closure and selloff in corporate restructuring, by examining 749 Japanese firms engaged in these two types of divestment activities in the 1990s and 1146 subsidiaries divested by these firms. For closure, we find that (1) divesting firms tend to be less profitable than non-divesting firm, (2) divested subsidiaries have characteristics suggestive of inefficiencies, and (3) divesting firms' profitability improved after the closure, albeit slowly. The results suggest that firms employ closure mainly to discontinue inefficient operations. For selloff, in contrast, we find that (4) divesting firms are no less profitable than non-divesting firms, (5) divesting firms' profitability did not change but their investment intensity increased substantially around the divestiture, and (6) divested subsidiaries had characteristics of high salability and separability. The results suggest that selloff is used to raise funds for the remaining parts of divesting firm. Overall, our results suggest that closure and selloff play heterogeneous roles in the restructuring of Japanese firms.
KW - Closure
KW - Japan
KW - Restructuring
KW - Selloff
KW - Subsidiary
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U2 - 10.1016/j.jjie.2015.05.007
DO - 10.1016/j.jjie.2015.05.007
M3 - Article
AN - SCOPUS:84934904490
VL - 38
SP - 73
EP - 92
JO - Journal of the Japanese and International Economies
JF - Journal of the Japanese and International Economies
SN - 0889-1583
ER -