Open Access
Subscription Access
Financial Restructuring and its Impact on Shareholders’ Wealth in Selected Companies in India
Subscribe/Renew Journal
Purpose : The purpose of the study was to analyze the effect of financial restructuring on shareholders’ wealth of manufacturing companies. This study investigated if there was a significant difference in shareholders’ wealth of the firms after the restructuring.
Methodology : This study included a sample of 146 firms of different manufacturing sectors and related sub-sectors in India that had undergone financial restructuring. This study involved a two-stage methodology. In the first part, paired sample t-test was used to investigate the significant difference in financial ratios in pre and post-restructuring periods. In the second part of the methodology, the focus was given to checking the impact of restructuring on the shareholders’ wealth of the companies in the post-restructuring period using various techniques like factor analysis, correlation matrix, and multiple regression analysis.
Findings : The results showed a significant difference in four financial parameters in the pre-and post-restructuring periods. Moreover, it was also found that restructuring considerably impacted the shareholders’ wealth of firms in all factors except growth.
Practical Implications : These results are recommended to financial institutions, banks, and executives. This study may also be used for understanding the reasons behind restructuring and to evaluate whether restructuring created value for shareholders or not. This study could be used to analyze the shift in the structure after restructuring.
Originality/Value : The study found that restructuring improved the shareholders’ wealth of the firms in the short-term and long-term.
Keywords
Restructuring, Shareholders’ Wealth, Liquidity, Financial Restructuring, Profitability.
JEL Classification Codes : C12, C31, G21, G34
Paper Submission Date : May 30, 2021; Paper sent back for Revision : March 23, 2022 ; Paper Acceptance Date : April 15, 2022 ; Paper Published Online : September 15, 2022
- Ahmed, M., & Ahmed, Z. (2014). Mergers and acquisitions: Effect on financial performance of manufacturing companies of Pakistan. Middle-East Journal of Scientific Research, 21(4), 689–699.
- Azhagaiah, R., & Kumar, T. S. (2011). A study on the short-run profitability of acquirer firms in India. Indian Journal of Commerce and Management Studies, 2(7), 59–66.
- Das, S. (2014). Performance mantra of the regional rural banks: An evaluation between the pre-merger and post-merger era. Jindal Journal of Business Research, 3(1–2), 14–28. https://doi.org/10.1177/2278682116629536
- Desai, J., & Joshi, N. A. (2015). Financial restructuring and its impact on corporate performance in steel industry in India. International Journal of Management and Social Sciences Research, 4(11), 33–41.
- Dobre, F., Brad, L., Ciobanu, R., Turlea, E., & Caloian, F. (2012). Management performance audit in mergers and acquisitions. Procedia Economics and Finance, 3, 309–314. https://doi.org/10.1016/S2212-5671(12)00157-8
- Francoeur, C., Ben Amar, W., & Rakoto, P. (2012). Ownership structure, earnings management and acquiring firm post-merger market performance: Evidence from Canada. International Journal of Managerial Finance, 8(2), 100–119. https://doi.org/10.1108/17439131211216594
- Healy, P. M., Palepu, K. G., & Ruback, R. S. (1992). Does corporate performance improve after mergers? Journal of Financial Economics, 31(2), 135–175. https://doi.org/10.1016/0304-405X(92)90002-F
- Igbinosa, S., Sunday, O., & Babatunde, A. (2017). Empirical assessment on financial regulations and banking sector performance. Journal of Central Banking Theory and Practice, 6(3), 143–155. https://doi.org/10.1515/jcbtp-2017-0024
- Indhumathi, G., Selvam, M., & Babu, M. (2011). The effect of mergers on corporate performance of acquirer and target companies in India. The Review of Financial and Accounting Studies, 1, 14–40.
- Joash, G. O., & Njangiru, M. J. (2015). The effect of mergers and acquisitions on financial performance of banks (a survey of commercial banks in Kenya). The International Journal of Innovative Research and Development, 4(8), 101–113.
- Joshi, N. A., & Desai, J. (2019). Financial restructuring and its impact on operating performance in the energy sector in India. Indian Journal of Finance, 13(1), 37–54. https://doi.org/10.17010/ijf/2019/v13i1/141047
- Jucunda, M. E., & Sophia, S. (2014). Do acquisitions add value to acquirers in India? A study on the sensitivity of the stock market and acquirer returns. Indian Journal of Finance, 8(5), 5–18. https://doi.org/10.17010/ijf/2014/v8i5/71914
- Kiliç, M. (2011). Cross-border bank acquisitions and banking sector performance: An empirical study of Turkish banking sector. Procedia-Social and Behavioral Sciences, 24, 946–959. https://doi.org/10.1016/j.sbspro.2011.09.028
- Osoro, P. M. (2014). The effect of financial restructuring on the financial performance of commercial banks in Kenya (Doctoral dissertation). University of Nairobi, Kenya.
- Patel, R., & Patel, M. (2015). Does merger be prolific? A study of selected Indian banks. International Journal of Applied Financial Management Perspectives, 4(3), 1965–1970.
- Prakash, S. (2017). The impact of mergers and acquisitions on shareholders' value: An empirical analysis of select Indian companies. Indian Journal of Finance, 11(9), 22–38. https://doi.org/10.17010/ijf/2017/v11i9/118087
- Raghuvanshi, A., & Raghuvanshi, A. (2014). Determinants of shareholder gains in acquisitions: An empirical study in the Indian corporate sector. Indian Journal of Finance, 8(2), 37–48. https://doi.org/10.17010/ijf/2014/v8i2/71979
- Rani, N., Yadav, S. S., & Jain, P. K. (2015). Financial performance analysis of mergers and acquisitions: Evidence from India. International Journal of Commerce and Management, 25(4), 402–423. https://doi.org/10.1108/IJCoMA-11-2012-0075
- Rashid, A., & Naeem, N. (2017). Effects of mergers on corporate performance: An empirical evaluation using OLS and the empirical Bayesian methods. Borsa Istanbul Review, 17(1), 10–24. https://doi.org/10.1016/j.bir.2016.09.004
- Sharma, D. S., & Ho, J. (2002). The impact of acquisitions on operating performance: Some Australian evidence. Journal of Business Finance & Accounting, 29(1–2), 155–200. https://doi.org/10.1111/1468-5957.00428
- Shijaku, G. (2017). Does concentration matter for bank stability? Evidence from the Albanian banking sector. Journal of Central Banking Theory and Practice, 6(3), 67–94. https://doi.org/10.1515/jcbtp-2017-0021
- Shil, N. C. (2009). Performance measures: An application of economic value added. International Journal of Business and Management, 4(3), 169–177. https://doi.org/10.5539/ijbm.v4n3p169
- Singh, O., & Bansal, S. (2017). An analysis of revenue maximising efficiency of public sector banks in the post-reforms period. Journal of Central Banking Theory and Practice, 6(1), 111–125. https://doi.org/10.1515/jcbtp-2017-0006
- Srinivas, K. (2010). Pre and post merger financial performance of merged banks in India - A select study. Indian Journal of Finance, 4(1), 3–19.
- Sufian, F., Muhamad, J., Bany-Ariffin, A. N., Yahya, M. H., & Kamarudin, F. (2012). Assessing the effect of mergers and acquisitions on revenue efficiency: Evidence from Malaysian banking sector. Vision, 16(1), 1–11. https://doi.org/10.1177/097226291201600101
- Vanitha, S., & Selvam, M. (2007). Financial performance of Indian manufacturing companies during pre and post merger period. International Research Journal of Finance and Economics, 12, 7–35.
- Verma, B. P., Maji, P., & Nair, S. (2013). Mergers & acquisitions and their impact on corporate - values: Pre and post-merger analysis of Indian banks. Indian Journal of Finance, 7(2), 5–16.
- Vulanovic, M. (2017). SPACs: Post-merger survival. Managerial Finance, 43(6), 679–699. https://doi.org/10.1108/MF-09-2016-0263
Abstract Views: 238
PDF Views: 0