Case | HBS Case Collection | January 2002 (Revised September 2002)

Corporate Renewal in America

by Bruce R. Scott and Thomas S. Mondschean

Abstract

Discusses various macroeconomic, regulatory, technological, and financial forces that led to increased corporate restructuring in the United States beginning in the mid-1980s. The U.S. financial system is often viewed as the most developed in the world and a model for other countries to follow. Similarly, the U.S. model of corporate governance--with its emphasis on shareholder value and an active market for corporate control--is also viewed as a model. Examines pressures for corporate restructuring and the emergence of an active market for corporate control for very large firms beginning in the early 1970s. Discusses the effects of this restructuring on corporate profitability and productivity, and provides data on the evolution of a number of indicators of performance, including productivity by sector, market capitalization relative to replacement cost, and rates of return both on assets and on equity. In brief, it finds that U.S. firms showed significantly improved after-tax returns on shareholder equity over the period while failing to make significant improvements on their pretax returns on assets--adjusted for the effects of the business cycle. Given the lack of comparable accounting data on returns across countries, conclusions about the performance of U.S. firms versus European ones isn't possible.

Keywords: Performance Evaluation; Corporate Governance; Macroeconomics; Economic Systems; Restructuring; Markets; Private Sector; Corporate Finance; Germany; Japan; United States;

Citation:

Scott, Bruce R., and Thomas S. Mondschean. "Corporate Renewal in America." Harvard Business School Case 702-018, January 2002. (Revised September 2002.)