Abstract Under the pressure of 10-year long economic decline, Japanese firms are struggling to improve their profitability. As one of the ways to do it, Japanese large firms have begun to reorganize their organizational structure and process. This reorganization includes separating strategic and operational decision-making more clearly, decentralizing more decision-making authority, making divisions more autonomous and self-contained to make a prompt decision in response to market conditions at the divisional level. In this paper, the performance of reorganization is preliminarily analyzed based on the sample of 49 Japanese firms which publicized reorganization during 1994-2000. Two ROA are used as performance measures of reorganization. The results show that organizational performance declines after reorganization, but there is some possibility that a time lag exists between implementation of reorganization and its smooth functioning. '7