Changes in Corporate Restructuring Processes in Japan, 1981-2007

Hoshi, Takeo; Koibuchi, Satoshi; Schaede, Ulrike

We analyze a large database collected from newspaper articles that report on major episodes of corporate restructuring in Japan between 1981 and 2007. By linking this database with financial data on public firms, we identify changes in the likelihood that a distressed undergoes restructuring, as well as in some measures adopted during restructuring. We find that the way distressed Japanese firms are restructured has changed during this period. The likelihood that a large distressed firm with high levels of debt undergoes restructuring has declined. Those firms that undergo restructuring continue to adopt more aggressive measures in terms of layoffs and cutbacks than other distressed firms, suggesting that "restructuring", when it happens, involves real adjustments. Banks continue to be important for firms with a clearly identified main bank, and the main bank is more likely to push for more drastic reductions in debt and bank loans than other entities leading a restructuring event.

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Academic Units
Center on Japanese Economy and Business
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Center on Japanese Economy and Business Working Papers, 272
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February 15, 2011