CORPORATE RESTRUCTURING AND INVESTMENT HORIZONS IN THE UNITED-STATES,1976-1987

Many observers of the corporate restructuring that reached major propo rtions in the United States in the 1980s have believed that the market for corporate control had a serious negative impact on companies' lon g-term investment, which in turn contributed to the United State's dec line in global competitiveness. In the following study, the author loo ks carefully at the effects of financial restructurings on investment, especially at expenditures on R&D, in a large set of companies catego rized according to their level of technology and the length of their i nvestment horizon. She then compares the U.S. situation with that in t he United Kingdom, Germany, and Japan. She concludes that, though many such events occasioned no change at all in investment strategies, res tructuring pressures and declines in investment tended to concentrate in certain industries. She also finds that investment decisions were u sually rational, given high interest rates and a tax environment that favored debt over equity.