In Defense Of Plant Closings

Abstract

Globalization of markets and technological advancements result in, among other things, closing of uncompetitive plants. This paper defends plant closings. We argue that a plant is not necessarily an unfortunate event; rather, it is another productive assets re-deployment alternative available to managers. Possible causes and shareholder wealth consequences of plant closing are examined. A plant closing valuation model is developed. This is followed by an example which illustrates the method to accurately compute the plant closing value.