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Insolvency administration as a strategic response to financial distress

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Author Info

  • James Routledge

    (Faculty of Business, Bond University, Gold Coast, Queensland, Australia)

  • David Morrison

    (TC Beirne School of law, The University of Queensland, St. Lucia, Queensland, Australia)

Registered author(s):

    Abstract

    This study considers whether the strategic decision to enter voluntary administration (VA) rather than to trade the company’s business for a protracted period of declining performance is systematically related to the effective monitoring of management decision-making. Analysis that tests the association between strategic entry into VA and the likelihood that a company will reorganize in VA is also presented. We find about half of the companies in our sample entered VA as a strategic choice. The likelihood of strategic entry to VA increased with the proportion of independent board directors, the existence of an audit committee and a dual CEO/chair board structure. Subsequent analysis of reorganization outcomes suggests that strategic entry into VA improves prospects for a successful reorganization.

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    File URL: http://aum.sagepub.com/content/37/3/441.abstract
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    Bibliographic Info

    Article provided by Australian School of Business in its journal Australian Journal of Management.

    Volume (Year): 37 (2012)
    Issue (Month): 3 (December)
    Pages: 441-459

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    Handle: RePEc:sae:ausman:v:37:y:2012:i:3:p:441-459

    Contact details of provider:
    Web page: http://www.agsm.edu.au

    Related research

    Keywords: corporate governance; financial distress; monitoring; performance;

    References

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