Insolvency administration as a strategic response to financial distress

James Routledge and David Morrison
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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

Australian Journal of Management, 2012, vol. 37, issue 3, 441-459

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.

Keywords: corporate governance; financial distress; monitoring; performance (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:37:y:2012:i:3:p:441-459

DOI: 10.1177/0312896211428494

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