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The Effects of Restructuring Charges on Stock Price and Analyst Forecast Accuracy

Keener, Mary Hilston
http://rave.ohiolink.edu/etdc/view?acc_num=kent1173383712

Abstract Details

2007, PHD, Kent State University, College of Business and Entrepreneurship, Ambassador Crawford / Department of Accounting.
This dissertation presents three essays that examine the usefulness of reported operational restructurings to corporations, financial analysts, and investors. The dissertation focuses on the usefulness of operational restructurings for companies restructuring for several different reasons, namely healthy companies restructuring to improve their efficiency or financially distressed firms restructuring to avoid filing for bankruptcy. The first essay compares firms in financial distress that operationally restructure to avoid bankruptcy and financially healthy firms that restructure for improving efficiency. The second essay focuses on the impact of restructuring on security prices and returns. The third essay examines the impact of restructuring on analysts’ forecast revisions, analyst forecast accuracy and analyst forecast bias. For restructuring companies, the first essay hypothesizes that financially distressed firms differ from healthy firms and companies that subsequently file for bankruptcy within three years differ from other financially distressed restructured firms that are able to avoid bankruptcy following a successful restructuring. The hypotheses of the second essay state that restructuring charges are value relevant and that the magnitude of the value relevance of the restructuring charge information depends on a firm’s reason for restructuring. The hypotheses in the third essay state that analysts revise their forecasts downward over the short-run and slightly upward over the long-run after learning of a restructuring announcement. Also, the third essay predicts that analyst forecast accuracy decreases with the increasing probability of financial distress during the year of the restructuring. The first essay provides the link between restructuring efforts by corporations and subsequent bankruptcy filing. The results of the second essay demonstrate that the magnitude of corporate restructuring charges tends to provide value relevant information to investors. Both the restructuring and financial distress variables are highly significant and strongly support the research hypothesis that restructuring costs (financial distress) have positive (has negative) impact on prices and returns. The results of the third essay suggest that analysts revise their forecasts downward after a restructuring charge announcement. The results also demonstrate that analyst forecast accuracy decreases with the increasing probability of financial distress and show that analysts are still optimistically biased after a restructuring charge.
Ran Barniv (Advisor)
185 p.
restructuring charges; stock price; returns; analyst forecast accuracy; analyst forecast bias; analyst forecast revisions; financial health

Recommended Citations

Citations

  • Keener, M. H. (2007). The Effects of Restructuring Charges on Stock Price and Analyst Forecast Accuracy [Doctoral dissertation, Kent State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=kent1173383712

    APA Style (7th edition)

  • Keener, Mary. The Effects of Restructuring Charges on Stock Price and Analyst Forecast Accuracy. 2007. Kent State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=kent1173383712.

    MLA Style (8th edition)

  • Keener, Mary. "The Effects of Restructuring Charges on Stock Price and Analyst Forecast Accuracy." Doctoral dissertation, Kent State University, 2007. http://rave.ohiolink.edu/etdc/view?acc_num=kent1173383712

    Chicago Manual of Style (17th edition)

kent1173383712
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© 2006, all rights reserved.
This open access ETD is published by Kent State University and OhioLINK.