Insolvency administration as a strategic response to financial distress
AbstractThis study considers whether the strategic decision to enter voluntary administration (VA) rather than to trade the companyâ€™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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Bibliographic InfoArticle provided by Australian School of Business in its journal Australian Journal of Management.
Volume (Year): 37 (2012)
Issue (Month): 3 (December)
Contact details of provider:
Web page: http://www.agsm.edu.au
corporate governance; financial distress; monitoring; performance;
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