Survival tactics for distressed firms in emerging markets

Kun Jiang () and Susheng Wang ()
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Kun Jiang: Sun Yat-Sen University
Susheng Wang: Hong Kong University of Science and Technology, Shanghai University, and Fudan University

Asia Pacific Journal of Management, 2024, vol. 41, issue 2, No 14, 823-866

Abstract: Abstract Understanding how firms cope with economic crises is of great importance, particularly in this period of rising interest rates coupled with a severe pandemic crisis. This study conducts an empirical analysis of firms in distress based on a large firm-level panel dataset containing detailed micro-level information on Chinese manufacturing firms. We study economic distress rather than financial distress. Moreover, we identify survival tactics adopted by distressed firms and the factors driving their choice of tactics. We show that three particular survival tactics help distressed firms recover, namely, reliance on fixed assets, reliance on intangible assets, and cost reduction. Furthermore, we show the critical role of institutional development in emerging economies, where institutions include product markets, financial markets, and legal institutions.

Keywords: Firms in distress; Survival tactics; Emerging markets; Institutional development; Ownership structure; Political connections (search for similar items in EconPapers)
JEL-codes: D23 D73 P31 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10490-023-09873-w

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