Speculative management: Corporate restructuring and the American stock market, 1984--1997

This study describes and conceptualizes the relationship between corporate restructuring and highly speculative late 20th century financial markets. Corporate restructuring activities are interpreted as speculative management, actions oriented toward secondary security markets to affect stock values. Restructuring spread among 167 very large American firms in a wave: beginning before 1984, cresting between 1991 and 1993, and declining after 1994. Corporate governance structures, financial accounting and the business media channeled the effect of corporate restructuring on stock values, functioning as social intermediaries linking corporations to security markets. Corporate governance structures were transformed during the period into speculative teams of stock-optioned executives and activist owners, bonded by shared interest in stock appreciation. These teams exploited flexible financial accounting rules governing restructuring to manipulate reported profits, an important base of security valuation. Restructuring activities, carefully packaged by speculative teams to conform to prevailing conceptions of aggressively good management, were communicated to the financial community through the business media. Inflection points of the wave of restructuring correspond to changes in these social intermediaries. Restructuring was intentionally speculative, produced by persons powerfully situated between corporations and markets for corporate stock.