A generalized model of decision‐making processes for companies in financial distress

Stewart A Leech, Nicole Clark and Philip A Collier

Accounting Forum, 1999, vol. 23, issue 2, 155-174

Abstract: Decisions by insolvency experts are vital to the future of a company in financial difficulties and impact the financial returns to creditors and other stakeholders. This paper describes a generalized model of the decision‐making processes used by insolvency experts when dealing with companies in financial distress. The model includes identification of high‐level factors that are important in making insolvency decisions and how these factors are used in the decision‐making processes of insolvency experts. In particular, financial and non‐financial factors are required for judgments about relevant stakeholders and the future of a company. Validation experiments show a high degree of conformance between the model and a variety of actual cases.

Date: 1999
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DOI: 10.1111/1467-6303.00009

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