Successful turnarounds in bankrupt firms? Assessing retrenchment in the most severe form of crisis

Rico, Manuel; Puig, Francisco

doi:10.1016/j.brq.2019.06.002

Cited by 8 publications

(6 citation statements)

References 36 publications

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“…Other country-specific factors with effect on the variation of benchmarks from one year to another are changes in regulation, in special that on bankruptcy (López-Gutiérrez et al, 2012;Rico & Puig, 2019). Thus, firms' reorganization under the US bankrupcy law (Chapter 11) induces different response to macroeconomic instability in terms of bankruptcy than that in the UK, because the US regulation temporarily protects distressed firms from bankruptcy (Bhattacharjee et al, 2009b).…”

Section: Changing Benchmarks By Year Country and Sectormentioning

confidence: 99%

“…To overcome the problem of changing benchmarks in the three dimensions (time, country, and industry) the solutions used by researchers are varied (Liou & Smith, 2007;Khoja et al, 2019;Rico & Puig, 2019). ( 1) The analysis can be performed for a unique industry, being the usual that only one country and one year were taken for the study.…”

Section: Changing Benchmarks By Year Country and Sectormentioning

confidence: 99%

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Common distress and reorganization patterns by sector and country for SMEs in six European countries using PDFR

Tascón,

Laitinen,

Castaño

et al. 2023

Rev. contab.

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This study contributes to identifying common distress patterns in financial indicators by sector and country in Finland, France, Germany, Italy, Portugal, and Spain as well as ex-post signals of reorganization success. We use PDFR that provides a distance-to-failure measure and allows us to track the behavior of different features of the firm proxied by accounting ratios. Our results show that indicators of financial structure, followed by working capital, profitability on assets, margin over sales and cash flow to assets, are the most discriminant variables of failed SMEs across all sectors and countries analyzed. By contrast, during reorganization, return on assets and its components are the main initial drivers of recovery, whereas the financial structure factors show a progressive but slow recovery. Boosting and Z-scores are used for robustness. Este estudio contribuye a la identificación de patrones comunes de fracaso en indicadores financieros por sector y país en Alemania, España, Finlandia, Francia, Italia y Portugal, así como a la identificación de patrones comunes de éxito en la reorganización. Utilizamos PDFR, que proporciona una medida de distancia al fracaso y permite hacer un seguimiento de la evolución de la empresa a través de sus ratios contables. Nuestros resultados muestran que los indicadores de estructura financiera, seguidos de fondo de maniobra, rentabilidad sobre activos, margen sobre ventas y cashflow sobre activos, son las variables más discriminantes de las pymes clasificadas como fracasadas, en todos los sectores y países analizados. En contraste, durante la reorganización, la rentabilidad sobre activos y sus componentes son los principales inductores iniciales de la recuperación, mientras que los indicadores de estructura financiera muestran una progresiva pero lenta recuperación. Se utilizan Boosting y Z-score como medidas de robustez.

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Section: Changing Benchmarks By Year Country and Sectormentioning

confidence: 99%

Section: Changing Benchmarks By Year Country and Sectormentioning

confidence: 99%

Common distress and reorganization patterns by sector and country for SMEs in six European countries using PDFR

Tascón,

Laitinen,

Castaño

et al. 2023

Rev. contab.

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“…Operational moves, such as efficiency-increasing measures, can “stabilize the competitive position of the firm by lowering costs” (Arogyaswamy et al, 1995, p. 502), and layoffs are the largest contributors to cost savings during operational restructuring (Chowdhury & Lang, 1996). Accordingly, better turnaround performance, in terms of avoiding insolvency, has been found to be associated with proactive downsizing (Geoffrey Love & Nohria, 2005), efficiency measures (Hambrick & Schecter, 1983), layoffs (Norman et al, 2013), and cost retrenchment (Rico & Puig, 2019).…”

Section: Hypotheses Developmentmentioning

confidence: 99%

Sacrifice, Protect, and Hope for the Best: Family Ownership, Turnaround Moves, and Crisis Survival

Bertschi-Michel

Sieger

Wittig

et al. 2022

Entrepreneurship Theory and Practice

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A critical yet unanswered question for family-owned firms in a survival-threatening crisis is which turnaround moves to employ and for what reasons. Building on noneconomic goals associated with family ownership and related socioemotional wealth (SEW) considerations, we theorize that the higher the degree of family ownership, the more likely family owners are to sacrifice normative SEW dimensions and to protect instrumental SEW dimensions. This then affects which operational, portfolio, financial, and managerial turnaround moves are likely to be employed, and ultimately, the odds of insolvency. Analyzing a unique sample of responses from 209 bank turnaround managers generally confirms our theorizing.

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“…Retrenchment is the reduction in expenses due to different environmental stimuli (Budros, 2001). However, it should not be regarded as a general turnaround policy and must be used with caution (Rico & Puig, 2019).…”

Section: Theoretical Underpinningsmentioning

confidence: 99%

“…When earnings are insufficient to cover expenses, it is called failure . Bankruptcy involves court proceedings that legally declare insolvency (Rico & Puig, 2019). In terms of financial distress vs. bankruptcy, there are two schools of thought.…”

Section: Theoretical and Empirical Debatementioning

confidence: 99%

Corporate governance and financial distress: A review of the theoretical and empirical literature

2022

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This study comprehensively reviews the theoretical and empirical literature on the relationship between corporate governance and financial distress and provides future research directions. We follow several different approaches by identifying, reviewing, and classifying related articles during the period 1985 to 2021. We used a set of keywords that included a combination of different terms of corporate governance and financial distress. Our review indicates that the majority of the studies based their arguments considering a single theory. The generalizability of different results in less explored countries is a serious concern and the one‐size‐fits‐all approach does not apply to the corporate governance‐financial distress relationship. Several different theories and confounding factors need consideration when examining the relationship between corporate governance and financial distress. Our review highlights future avenues by suggesting that studies should consider different governance attributes and test those factors in different and diverse contexts. Our review of the literature provides implications for academics and practitioners.

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Successful turnarounds in bankrupt firms? Assessing retrenchment in the most severe form of crisis

Cited by 8 publications

References 36 publications

Common distress and reorganization patterns by sector and country for SMEs in six European countries using PDFR

Common distress and reorganization patterns by sector and country for SMEs in six European countries using PDFR

Sacrifice, Protect, and Hope for the Best: Family Ownership, Turnaround Moves, and Crisis Survival

Corporate governance and financial distress: A review of the theoretical and empirical literature

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