Microsoft Word - 13183-48210-1-SM-writer2-new Asian Journal of Finance & Accounting ISSN 1946-052X 2018, Vol. 10, No. 1 ajfa.macrothink.org 129 Corporate Restructuring and Investment Dr. Alhassan Ndekugri Allen University, 1530 Harden Street, Columbia, Sc, 29204 E-mail: andekugri@allenuniversity.edu Received: May22, 2018 Accepted: June 17, 2018 Published: June 17, 2018 doi:10.5296/ajfa.v10i1.13183 URL: https://doi.org/10.5296/ajfa.v10i1.13183 Abstract Corporate Restructuring looked at the strategies employed by managers and leaders of a corporation in times of performance decline to put the corporation back to its normalcy. It is of no doubt that a good performing corporation motivate people to invest. This Research was conducted to investigate how the participants as investors and potential investors want from their Corporate managers and leaders in terms of putting the corporation in good shape. This research Used a survey technique and data was analyzed using SPSS and Excel software. The results showed that there was a relationship between Corporate previous performance and investment decision, at a p-values of 0.779 and 1.000 respectively, which was greater than the significance level of 0.05 we failed to reject the null hypothesis and concluded both Corporate previous performance and Corporate location may have an influence on investors decision making. Keywords: Corporate restructuring, decision making, investment Asian Journal of Finance & Accounting ISSN 1946-052X 2018, Vol. 10, No. 1 ajfa.macrothink.org 130 Introduction Corporate restructuring plays a very important role in the success of a company in times of performance decline. According to Allen and Bonaccorsi di Patti, Ashta and Tolle (2004), Gilson (2001), Lai and SuddarSanam (2001), Weston et al. (2004), restructuring has three main groups: The first is business restructuring (Hillier et al. 2005; Lang et al.,1995; Lasfer et al.,1996; Kang and Shivdasani,1997; Muherin and Boone; Shleifer and Vihny,1992; Weston et al. ,2004). Cost rationalization and finding new market. Financial restructuring (Finnerty,1985 Powell & Yawson,2008). The third refers to management restructuring (Datta & Iskandar-Datta,1995; Furtado & Vijay,1990). Tricker (2012) said that corporate governance concerns the way power is exercised over corporate entities, including but not limited to board activities and its relationship with shareholders or members, those in charge of managing the enterprise and other stakeholders whose input are necessary to help sustain the company’s survival. Brown and Gioai (2002) examine organizational identity challenges in the context of a new division within an organization. Likewise, Corley and Gioai (2004) examine ambiguity in the context of corporate spinoffs and said that corporate brand name changes may help to restore successful operations of the company. Motivation by this research This research was conducted as a result of the many problems engulfing companies of late, for instance, there was no doubt that several well-known companies such as Sears, Kmart, Wall-Mart, Toys R Us, Best Buy, Macy’s, JCPenney, Target, Sam’s club, and many more other companies not listed here were among the companies that have closed some of their stores because of non-performance. Restructuring if taken would to identify areas of concern to address them instead of permanent closure thereby having an effect on investors and potential investors and employees Purpose of the research The purpose of this research was to investigate how individual’s thoughts about Corporate restructuring may have an effect on their future investment decisions Hypothesis Statement Null hypothesis: 1. A corporate previous performance would have an influence on future investment decision 2. Corporate location would affect investors decisions to invest Research question 1. Is there any relationship between Corporate previous performance and investment decision by investors? Asian Journal of Finance & Accounting ISSN 1946-052X 2018, Vol. 10, No. 1 ajfa.macrothink.org 131 Significance of the study It was the firm believe that this research would contribute significantly in the field of academia especially in the area of finance to help discover problems that faced companies such as performance decline due to poor products, leadership crises, employee non-involvement and failure of brand name. Several companies had closed stores because of lack of restructuring techniques and being reactive to problems instead of being proactive. As a result of these many problems that existed in companies, investors and potential investors are reluctant in making a decision to invest for fear of not making profit. For future leaders of a company, this research will help to understand the need of customers, investors and potential investors by being proactive instead of reactive in solving problems relating to their companies. Literature Review Aggarwal and Dahiya (2006) had lookedabout 20 listed stock exchanges by analyzing their performance and conclude that making Change helps to improve performance after listing analogy was also supported by Otchere and Abou-Zied (2008) who also investigated the demutualization process of the Australian stock exchange and concluded that the conversion from mutual to publicly traded exchange was helpful in the stock market liquidity. These results were also confirmed by Azzam (2010) and Oldford and Otchere (2011). According to Brown (2011:164), it very imperative for Organization to respond to challenges in the internal and external environment by introducing some changes that may help to bring about improvement. By undertaking a diagnosis process, organizations are able to identify the problem areas and apply structural, behavioral or technical programs to help put back the company on its feet, (Brown, 2011:136). For this change of programs to work successfully, Armenika and Harris (2009:130) pointed out that the company should involve the employees who are the backbone of the company who must have confidence in the diagnosis of the problems to help in the implementation process. Why the need to restructure Corporate restructuring is initiated with a purpose and requires leadership commitment whereby leaders deals with issues proactively and not reactively, over the years, corporation have continuously been changing to meet the needs of the consumer only when there was a problem that was brought to the attention of management. To avoid reactive ways of problem solving, Ac Brown (2011) said that, random or haphazard are the two types of changes that occur in organization that should take place holistically. A change can bring about some positive or negative results depending on how it is carried out; any change that brings a positive result on the organization will help to meet the objective of that organization, on the other hand, any change that produces a negative result is only sinking the company further. It is no doubt that, corporate America have been in constant search of ways to improve, as a result, management skills and efficiency of employees were most considered besides improving the products for consumers. Asian Journal of Finance & Accounting ISSN 1946-052X 2018, Vol. 10, No. 1 ajfa.macrothink.org 132 Restructuring to produce quality Quality drives business in any organization, when the consumer is satisfied with the product they bought, then they can be sure of coming back next time, as a result, restructuring of organizations will have to take into consideration quality management to gain the trust of customers, for this reason, for an organization to be successful in the restructuring process, every member of the organization should have a clear picture of the measurement of quality (Nica, Monole, and Potcovaru,2016). Developing their position, the work they performed(Morselli,2015). In other parts of the world for instance, in Europe, there had been an established European foundation for quality management which approaches quality based on a widely-recognized model called EFQM excellence model. This model was implemented in more than 30,000 organizations in Europe and had yielded a positive result. The EFQM model explains how quality can significantly contribute to development of an organization and business excellence. Apart from Europe, quality restructuring also occurred in Romania where specialist had provided a relevant picture on how the total quality excellence model is implemented in companies in Romania (Olaru et al.2010), the emphasis was that total quality management was made up of several integration of all functions and processes taking place in an organization in order to meet the need of the customer. Customer satisfaction in the restructuring process Staya (2003) believes that having good customer satisfaction is important in maintaining customer loyalty. Heskett etal (1997) also believe that having customer loyalty is important it has a direct link with the continued survival and strengthening future growth. As a result, for a company to maintain stable profit, there must be a corresponding evaluation of the company from time to time to ensure that issues that hinder company performance are addressed. In other parts of the world such as the case of Germany, ThyssenKrupp had announced its upcoming portfolio transformation to drastically reduce its dependency on steel production to become a modern technology conglomerate, focusing on business activities such as elevators, refineries, ships, machinery and parts for the automotive industry [3]. Research in the field of business portfolio restructuring has emerged from more general research on corporate restructuring to ensure success over the years and have been considered a response factor in most corporation poor performance (Jonson,1996; Brauer,2006). Methodology This research used a survey technique, a sample size of 100 was administered to students and staff workers in Allen University using a random sampling of the participants. Each participant had the chance of answering the questions to the best of their knowledge, whiles it was required that participants completed the questionnaire within two weeks, some of the participant were not able to do so and other also answered the questions half way. Asian Journal of Finance & Accounting ISSN 1946-052X 2018, Vol. 10, No. 1 ajfa.macrothink.org 133 Research Design, data analysis and interpretation Polit and Hungler (1995:155) described research design as a blue print or outline for conducting the study in such a way that will have maximum control and would exercise over factors that could interfere with the validity of the research results. The research design is the researchers’ overall plan for obtaining answers to the research questions guiding the study. Burns and Gove (2001:223) state that designing a study helps researchers to plan and implement the study in a way that will help obtain the intended results. In this research,the questionnaires were designed to follow the survey technique, subjective in nature and allowed participants enough room to express themselves besides just answering the questions Data analysis play an important role in research so as to convert information gathered during the research into a meaningful and understandable information. this data was analyzed using excel software with color coding technique and SPSS Interpretation of Results Null hypothesis one 1. A corporate previous performance would have an influence on future investment decision. According to the results analyzed using non-parametric, one sample test, the outcome showed a value of 0.779 which was more than the significant level of 0.05, as a result we failed to reject the null hypothesis and concluded that a company previous performance may have an effect on investors decision to invest in a company. Null hypothesis two 2. Corporate location would affect investors decisions to invest The results of the non-parametric one sample test showed a result of 1.000 which was also more than the significant value of 0.05, as a result we also retained the null hypothesis and concluded that Company location whether local or abroad may have an effect on the investors decision to invest. Table 1. mean comparison of securities Z-score values Bonds 1 -0.65760 Stocks 2 -0.49320 Diversify 3 1.15079 As indicated on the table above, a descriptive statistic was also used to compare means of the three securities: Bonds, Stocks and Diversify from the formula Z=(X-µ)/σ. The absolute value of the Z-score tells the number of standard deviations the security is way from the mean. In this scenario, it means that diversification is about 1.151 standard deviation away from the mean and Bonds and stocks are -0.658 and -0.493 below the mean respectively. Asian Journal of Finance & Accounting ISSN 1946-052X 2018, Vol. 10, No. 1 ajfa.macrothink.org 134 Table 2. descriptive statistics of securities Descriptive Statistics N Minimum Maximum Mean Std. Deviation Skewness Kurtosis Statistic Statistic Statistic Statistic Statistic Statistic Std. Error Statistic Std. Error V4 0 V2 0 V3 0 V5 0 V6 0 V7 0 V8 3 1 23 9.00 12.166 1.680 1.225 . . Valid N (listwise) 0 Table 3. statistic values of the securities Statistics V8 N Valid 3 Missing 0 Mean 9.00 Std. Error of Mean 7.024 Median 3.00 Mode 1a Std. Deviation 12.166 Variance 148.000 Skewness 1.680 Std. Error of Skewness 1.225 Range 22 Asian Journal of Finance & Accounting ISSN 1946-052X 2018, Vol. 10, No. 1 ajfa.macrothink.org 135 Figure 1. response on investment From the Figure above, out of the 41 questionnaires that were returned, 24 of the respondents said that they have invested and 12 said they have not invested before, 5 respondents gave no response Figure 2. type of security invested From the figure, of those who said they invested before, 1 person invested in bonds, that is investment in debt securities, giving the investor a fixed income payment over a given period of time. The bond investor can either invest in Government or Corporate, thereby lending money to these entities in return for interest. At maturity, the principal investment is return to the investor. In the bond investment, the face or par value is specified e.g. $1000 and the coupon rate is also specified that is used to determine the coupon amount. 3 respondents said they invested in stocks. The stock investor buys shares of a Corporation and become a part owner, this gives the investor an opportunity to take part in decision making such as voting in the case of a common stock investment, however, the preferred stock investor has no voting right but has preference in terms of dividend payment other the common stock holder. While the bond has a maturity date, the stock has no maturity date. 23 respondents said they 12 24 5 0 5 10 15 20 25 30 Yes No No response Have you ever invested in a company? Bonds Stocks 2 or more 1 3 23 1 3 23 0 5 10 15 20 25 Asian Journal of Finance & Accounting ISSN 1946-052X 2018, Vol. 10, No. 1 ajfa.macrothink.org 136 invested in more than one security such as stocks, bonds, commercial paper, exchange traded fund… Figure 3. potential investors Figure 4. source of information for investment As far as information is concern for investors, 12 respondents said they got their information for investment on fortune 500 list, 2 respondents said they previously know the company before the investment, 6 respondents said they their information from newspapers, 1 respondent said the information was from Government source and 26 respondents said they got their information from other sources such as family and friends, online search engines, radio… 37 8 0 5 10 15 20 25 30 35 40 Yes No If you have not invested would you to do so in future? 12 2 6 26 1 0 5 10 15 20 25 30 Fortune 500 list Previously known the company News paper other Government forums How did you get this information about this investment opportunity? Asian Journal of Finance & Accounting ISSN 1946-052X 2018, Vol. 10, No. 1 ajfa.macrothink.org 137 Figure 5. potential problems faced by investors As far as investment and problem is concern, 10 respondents said that they have not experienced any problem during their period of investment, 6 respondents said that since their investment, there was no communication about the performance of the portfolio and that those companies’ communication system was not the best. 2 respondents said their companies folded after their investment and 7 said they experienced other problems such as ROI, and management styles of the company they invested. Figure 6. reason for investment Making a decision to invest instead of saving has some repercussions, as a result, 37 respondents said they had taken the risk to invest instead of savings and 7 respondents said they don’t trust banks. 7 2 6 10 0 2 4 6 8 10 12 Other Company folded No communication No problem Did you face any problem in the process of your investment? 37 4 -20 -10 0 10 20 30 40 50 60 Taking a risk Don't trust Banks Do you have any reason for investing instead saving in a Bank? Asian Journal of Finance & Accounting ISSN 1946-052X 2018, Vol. 10, No. 1 ajfa.macrothink.org 138 Figure 7. information for investment In making a decision to invest, some investors need some amount of information to help them, 20 respondents in this survey said that they need the current financial statement to help them understand the company performance before going ahead to invest, 7 of the respondents said they need the previous financial statement and 8 respondents said they need a detailed information to them make an investment decision and 7 respondents said they only need the company’s business plan so that they can understand both the short and long run objective of the company they putting their resources in. Figure 8. Making decision based on size of company Most investors have preference on the size of the company they want to invest, in this survey, 28 respondents in this survey said they prefer to invest in a company with 500 employees or less and 14 respondents said they prefer to invest in a company of 500 employees or more 20 7 8 7 0 5 10 15 20 25 Current Financial statement Previous Financial statement Detailed company description Company business plan What information do you want to be provided in order an invest decision? 28 14 0 5 10 15 20 25 30 company with less than 500 employees Company with more than 500 employees Does a company size matters in your investment decision? Asian Journal of Finance & Accounting ISSN 1946-052X 2018, Vol. 10, No. 1 ajfa.macrothink.org 139 Figure 9. information on investment performance When people invest they may want to know a certain information regarding their investment, in this survey, 14 respondents said they want to know about the risk involved and how that will affect their money, 4 respondents said they only want know the return on investment, and 19 of the respondents said they need to know other information such as time value of money of their investment, how their wealth will be maximized, and how their investment performs from time to time Figure 10. location of company and investment Most people may have some concerns about locational investment and its prospects, in this survey, 11 respondents said they prefer their investment to be put into companies based in their local country, 7 respondents said they want to invest in companies abroad and 23 respondents said they want to invest in both local and companies abroad 14 4 19 0 2 4 6 8 10 12 14 16 18 20 Risk involved ROI Other What information would you like to know about your investment? 11 7 23 0 5 10 15 20 25 Local Company abroad Both would you prefer to invest in a local company or company abroad? Asian Journal of Finance & Accounting ISSN 1946-052X 2018, Vol. 10, No. 1 ajfa.macrothink.org 140 Figure 11. Type of industry and investment Most investors have Preference on the type of industry to invest, in this survey,6 respondents said they want to invest in the sports industry, 3 respondents prefer to invest in the health sector, 1 respondent wants to invest in the tourism sector, 4 respondents want to invest in the automobile industry, and 15 respondents wants to invest in other sectors such as restaurants, technology, education, real estates Of those who responded that they did not invest, they propped further on their future investment decision and most of them said they will invest in the future with a few maintaining that they will not invest at all. Implication of the study This research would serve as a document for Corporation who are in trouble in terms of performance decline and needs restructuring. For the success of any Corporation, the communication aspect was very important by making sure that investors get up to date information regarding the company performance to help investors make an informed decision. Giving a true information of company would be the best way forward instead of false information that does not stand the test of time. Conclusion In all views expressed and data analyzed, most of the participants wanted frequent communications about their investment performance, for instance the risk related to their investment, company financial statement will help to make an informed decision. Most of the participants also wanted to know about the size of the company to understand whether the company is growing and how that would play a role in their investment decision. Others also said that they would invest in a company irrespective of location, whiles some also said that location would influence their decision to invest. 6 3 1 4 15 0 2 4 6 8 10 12 14 16 sports Health Tourism Automobiles Other Which of these industries would you prefer to invest in? Asian Journal of Finance & Accounting ISSN 1946-052X 2018, Vol. 10, No. 1 ajfa.macrothink.org 141 References Abed, S., & Roberts, C. (2011). Methods for scoring Annual reports narratives: The case of the extent of forward looking information, EAA, Rome Aggarwal, & Dahiya, S. (2006). Demutualization and public offering of financial exchange. Journal of applied corporate finance, 18, 105-113. Ahrens. (2004). Refining research questions in course of negotiating access for fieldwork in Humphrey. 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