TAILIEUCHUNG - Resizing The Organization 18

Resizing The Organization 18. This book seeks to provide executives with useful insights, tools, guidelines, principles, and lessons learned about organizational transition and change. | Financial Consequences of Employment Change Decisions 151 1 and 2 the asset downsizers showed improvements in returns on assets that were significantly higher than those of stable employers and also higher than those of their industries. We conclude that while some categories of downsizers improved their profitability through downsizing this effect is not sufficiently consistent across categories to justify rejection of the null hypothesis. The results of the regression of the change in ROA on the change in employment provided further support for this conclusion. Firms with larger increases or smaller declines in employment had larger increases in their returns on assets although that effect was very small. The same pattern of results held for the time period 1995 to 2000. Hypothesis 2 stated that there is no effect of changes in employment on total return on common stock in the year of the employment change and in the two succeeding years. Figure shows that for the 1982-to-2000 time period only two categories of companies consistently and significantly yielded higher total returns on their common stock than stable employers the asset and employment upsizers. However on an industry-adjusted basis only the asset upsizers yielded returns that were significantly higher than those of all other groups including stable employers see Figure . The cumulative total return by the end of year 2 for a 1 investment was for stable employers. For asset upsizers it was and it was for employment upsizers. In contrast it was for employment downsizers and for asset downsizers. The same overall pattern of results held for the 1995 to 2000 time period as Figures and demonstrate. In terms of Hypothesis 2 we reject the null and conclude that some types of restructuring namely asset upsizing and employment upsizing do produce significantly higher returns on common stock especially by year 2 after the restructuring. However on an industry-adjusted .

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