Impact of Corporate Life Cycle Stages on Managerial Restructuring: The Moderating Effect of Financial Distress

Abstract

Implementing an effective restructuring strategy is essential for a firm’s survival, especially when facing financial constraints. Financial distress affects a company's health and sustainability; therefore, adopting an appropriate corporate restructuring approach during a financial crisis is very important. Recognizing the importance of restructuring strategies in organizations, this research paper aims to analyze how different stages of the corporate life cycle influence managerial restructuring, a key aspect of corporate restructuring. The independent variable in the study is the stages of the corporate life cycle, classified using the methodology developed by Dickinson (2011), which is based on cash flows from accounting information, specifically the statement of cash flows, identified by Dickinson as a reliable indicator. The stages include Birth, Growth, Maturity, Shakeout, and Decline. Financial distress serves as a moderating variable in the study. The influence of corporate life cycle stages on restructuring strategies is analyzed both individually and in the context of financial distress. The study uses a panel data set of 314 non-financial Pakistani firms across thirteen diverse sectors over ten years, from 2013 to 2022. Logistic regression models are employed to investigate the impact of CLC stages on selected restructuring strategies. The findings show a lower tendency among Pakistani firms to replace top management at all stages.