A generalized model of decision-making processes for companies in financial distress

Abstract

Decisions by insolvency experts are vital to the future of a company in financial difficulties and impact the financial returns to creditors and other stakeholders. This paper describes a generalized model of the decision-making processes used by insolvency experts when dealing with companies in financial distress. The model includes identification of high-level factors that are important in making insolvency decisions and how these factors are used in the decision-making processes of insolvency experts. In particular, financial and non-financial factors are required for judgments about relevant stakeholders and the future of a company. Validation experiments show a high degree of conformance between the model and a variety of actual cases. Abstract

The impact of political pressure on novice decision makers: are auditors qualified to make going concern judgements?

“…The sessions used a case study in tandem with the computerized decision aid INSOLVE that is based on the computational model described in Leech et al (1998Leech et al ( , 1999 and Collier et al (1999). These case sessions were subsequently followed-up with group discussions designed to elicit insolvency specialists' perceptions of the decision aid and perspectives on the insolvency decision-making process.…”

“…Whereas an auditor has a strong likelihood of never having a client receive a going concern opinion (Sutton et al, 1995), insolvency professionals deal exclusively with organizations of questionable going concern status.This high level of experience and responsibility should facilitate a higher level of expertise in dealing with such companies. Leech et al (1998Leech et al ( , 1999 and Collier et al (1999) report an extended study of insolvency practitioners and a corresponding computational model of their decisionmaking patterns. The study was based on 23 insolvency specialists participating in the knowledge acquisition process and 17 (six of whom were not involved in the knowledge acquisition phase) participating in the validation of the model.…”

Impact of intelligent decision aids on expert and novice decision‐makers’ judgments

“…INSOLVE is a computerised intelligent decision aid that has been designed to replicate the decision-making processes of expert insolvency practitioners (Leech et al , 1998;Collier et al , 1999;Leech et al , 1999). It is the product of a four year project funded by the Australian Research Council and the Institute of Chartered Accountants in Australia (Information Technology Chapter).…”

Incase: Simulating Experience to Accelerate Expertise Development by Knowledge Workers

“…As events unfold and more information becomes available, the decisions are continually reassessed as to the viability of the business (Arnold et al ., ). The primary decision task that is made repeatedly in an insolvency domain is whether to liquidate or continue operating (commonly referred to as trade‐on) a company in financial distress (Leech et al ., ). Expertise is critical, as in many insolvency engagements the insolvency professional must absorb any additional losses incurred from continuing the operations of the business (Arnold et al ., ).…”