Review of Quantitative Finance and Accounting, 25: 319–339, 2005
2005 Springer Science + Business Media, Inc. Manufactured in The Netherlands.
The Performance Consequences of Operational
Department of Accounting and Information Systems, School of Business, University of Wisconsin, Madison,
THOMAS J. LOPEZ
School of Accounting, Moore School of Business, University of South Carolina, Columbia, SC 29208,
Tel.: 803-777-4387, Fax: +803-777-0712
PHILIP R. REGIER
School of Accountancy and Information Management, W. P. Carey School of Business, Arizona State University,
Tempe, AZ 85287-3406
Abstract. This study provides new evidence on the long-term performance effects of operational restructurings.
While managers claim that restructurings increase the efﬁciency and proﬁtability of companies, prior studies using
accounting data have reached mixed conclusions regarding the post-restructuring operational effectiveness of these
events. Using metrics that provide control for ﬁrm and industry performance in the absence of restructuring, and
examining a time horizon extending ﬁve years subsequent to the restructuring, our results are not consistent with
an improvement in operating performance resulting from restructuring after controlling for ex ante expectations
of ﬁrm and industry performance.
Keywords: restructuring, operating performance, operational restructurings
JEL Classiﬁcation: G340, M410
Corporate restructuring activity has intensiﬁed in recent years, spurring widespread debate
among corporate decision-makers, politicians, academics and ﬁnancial analysts about the
stakeholder consequences of these transactions.
The discretion allowed managers in the
content and the timing of restructuring charge recognition has generated substantial dis-
cussion in the popular press and heightened the interest of the Securities and Exchange
Controversy over the desirability of corporate restructuring typically
centers on the operational effectiveness of these events. Some argue that leaner, more ef-
ﬁcient organizations result from restructuring, while others assert that the organizational
disruption concurrent with and subsequent to restructurings exceeds any beneﬁts from such
Some critics further assert that restructurings distort a company’s earnings