A Transaction Cost Analysis of Restructuring Alternatives‪.‬

ABSTRACT This study extends the transaction cost economics (TCE) rationale to a firm's choice of two restructuring alternatives--selling off assets and laying off employees. It hypothesizes that a firm's preference between sell-off and layoff depends on the underlying transaction costs, which in turn are contingent on the relative specificity of physical and human assets. The findings of this study empirically support the hypotheses, and emphasize the importance of relative asset specificity, unlike many TCE studies.