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Factors Driving Companies to Take Assets Contraction and Their Performance
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|摘要:||This study investigates large assets contraction undertaken by U.S. companies during the post-Internet-Bubble (2001-2002) and Financial Tsunami (September 2008-March 2009) periods. I work on two issues. First, I examine several factors (including firm characteristics and corporate governance) that could drive companies to take downsizing decisions. Second, I trace the stock performance of these companies following their downsizing. The results show that the decision to downsize is negatively related to pre-downsizing operating performance and positively related to firm beta, debt ratio and level of diversification. I also find that CEO salary is positively associated with assets contraction, indicating that agency problems may exist in those downsizing companies. I further separate each sample into two subgroups by their stock price, and find that the companies with prices greater than $5 underperform their matching companies following their downsizing. This implies that they may not be able to deal with post-economic-shock consumer demand due to capacity insufficiency. These findings suggest that managerial overpessimistic view during world-wide economic shocks may result in wrong decisions.|
|Appears in Collections:||財務金融學系所|
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