The Impact of Business Restructuring on Firm Performance-Evidence from Publicly Traded Firms in China (Manuscripts‪)‬

ABSTRACT Many publicly traded companies in China underwent significant business restructuring in the last several years to achieve higher operating efficiency and greater growth opportunities. This paper examines the impact restructuring had on the operational aspects of these firms. We used changes in revenue, profit margin, return on assets and the total asset turnover ratio before and after the restructuring as proxies for firm performance and conducted tests to determine whether business restructuring resulted in significant changes. We also examined the stock price reaction to the restructuring announcements. Our study showed that there were significant improvements in total revenue, profit margin, and return on assets following restructurings but there was no evidence of any significant impact on asset turnover ratio. The market reaction to the restructuring announcements was positive and statistically significant. We also found evidence of significant market anticipation and overreaction to the restructuring announcements.