CORPORATE RESTRUCTURING DURING PERFORMANCE DECLINES IN JAPAN

This paper documents the restructuring of 92 Japanese corporations tha t experienced a substantial decline in operating performance between 1 986 and 1990. These firms implement a number of downsizing measures su ch as asset sales, plant closures, and employee layoffs. Firms also ex pand and diversify, and often restructure their internal operations. C ompared to US firms with a similar decline in performance, however, Ja panese firms are less likely to downsize, and layoffs affect a smaller fraction of their workforce. The frequency of asset downsizing and la yoffs in Japanese firms increases with the ownership by the firm's mai n bank and other blockholders. Blockholders also increase the probabil ity of management turnover, outside director removals and outside dire ctor additions, but decrease the likelihood of acquisitions. We docume nt improvements in operating performance following downsizing actions in Japan.