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The industrialized world has witnessed a significant deleveraging in the last decade. However, this deleveraging may not be evident in the rate at which corporate fixed assets are being reinvested. This could be due in part to the slow economic recovery or uncertain investment environment.
Companies are often required to undergo restructuring to boost their business performance. It could mean adjusting the way they manage their assets and operations, or https://capformalites.com/2023/06/13/capital-investment-and-restructuring/ changing their structure, in order to reduce or consolidate debt or improve their business processes. This may also involve transferring some of their assets to other entities as part of an asset transfer or sale or capital restructuring method that can drastically impact the financial stability of a business.
This paper utilizes cross-country panel data from 33 advanced economies to study the effects of corporate restructuring on output gains and capital productivity. We find using an instrumental variable model, that systemic periods (framed as corporate dummy) of debt reduction can lead to a decline in aggregate firm-level productivity and are positive for output growth through investment and capital productivity. However, this effect is counteracted by the negative impact of restructuring on the labor market and financial markets.