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Journal articles on the topic 'Distressed Debt'

Author: Grafiati

Published: 4 June 2021

Last updated: 1 February 2022

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1

Jaggi, Bikki, and Picheng Lee. "Earnings Management Response to Debt Covenant Violations and Debt Restructuring." Journal of Accounting, Auditing & Finance 17, no. 4 (2002): 295–324. http://dx.doi.org/10.1177/0148558x0201700402.

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The study investigates whether the choice of income-increasing or income-decreasing discretionary accruals is related to the severity of financial distress and whether this choice is also influenced by the creditors' waivers of debt covenant violations. Financially distressed firms experiencing debt covenant violations and/or debt restructuring during the 1989–96 period are used to evaluate the management's choice of discretionary accruals. Discretionary accruals are calculated based on four different accrual models. The results show that managers of financial distressed firms use income-increasing discretionary accruals if they are able to obtain waivers for debt covenant violations, and use income-decreasing discretionary accruals if debt restructuring takes place or debts are renegotiated because waivers are denied. These findings thus provide support to the expectation that the choice of income-increasing or -decreasing discretionary accruals is influenced by the severity of financial distress. They also provide an explanation for divergence in the results of earlier studies on the use of income-increasing or -decreasing discretionary accruals by financially distressed firms.

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2

Suriawinata, Iman Sofian. "Investigating the Simultaneity of Corporate Hedging and Debt Policies: Empirical Evidence from Indonesia." Gadjah Mada International Journal of Business 7, no. 2 (2005): 179. http://dx.doi.org/10.22146/gamaijb.5578.

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The primary objective of this paper is to investigate the simultaneity of corporate hedging and debt policies. Using a pooled sample of Indonesian non-financial listed firms covering the periods of 1996-2001, the present study finds evidence that corporate hedging and debt policies are simultaneously determined. That is, the use of debts motivate firms to hedge; but simultaneously, hedging increases debt capacity and induces firms to borrow more in order to take advantage of the tax benefits arising from additional debt capacity. Another important finding is that financially distressed firms –as indicated by their debt restructuring programs– are less motivated to hedge, because such firms will see that the option values of their equity will increase as their cash-flow volatilities increase. Therefore, financially distressed firms tend not to hedge; or at least, hedge lesser compared to those of firms that do not experience financial distress.

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3

Ohashi, Kazunari, and Manmohan Singh. "Japan's Distressed Debt Market." IMF Working Papers 04, no. 86 (2004): 1. http://dx.doi.org/10.5089/9781451850918.001.

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4

Frantz, Pascal, and Norvald Instefjord. "Debt overhang and non-distressed debt restructuring." Journal of Financial Intermediation 37 (January 2019): 75–88. http://dx.doi.org/10.1016/j.jfi.2018.08.002.

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5

Anson, Mark J. P. "A Primer on Distressed Debt Investing." Journal of Private Equity 5, no. 3 (2002): 6–17. http://dx.doi.org/10.3905/jpe.2002.320009.

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6

Stalker, Anthony. "Managing Distressed Debt and Extracting Value." CFA Institute Conference Proceedings Quarterly 26, no. 3 (2009): 41–46. http://dx.doi.org/10.2469/cp.v26.n3.9.

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7

Altman, Edward I., and Robert Benhenni. "The Anatomy of Distressed Debt Markets." Annual Review of Financial Economics 11, no. 1 (2019): 21–37. http://dx.doi.org/10.1146/annurev-financial-110118-123019.

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Over the last 30 years, the distressed debt market has come a long way and is now a legitimate investment asset class, albeit with periodic dramatic activity. Despite the benign credit cycle in US markets since the last great financial crisis, there are still more than 200 financial institutions in the United States, and a large number operating in other countries, such as Italy, Brazil, and India, specializing in investment in distressed and defaulted bonds and nonperforming loans. We document this novel and intriguing investment market, with a discussion of size, strategies, and performance. We also present new empirical results on pre- and postdefault experience, leveraging our unique databases on bond and loan prices and our indexes of performance of defaulted bonds and bank loans. The results show that the investment performance in distressed debt is not particularly impressive over the entire sample (1987–2016). For the last 10 years (2006–2016), however, the results are much better for overall outperformance, especially those using several strategies with respect to the seniority of the debt and market timing. This is due perhaps to favorable changes for creditors in the US bankruptcy code in 2005.

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8

Gul, Ferdinand A., Mehdi Khedmati, Edwin KiaYang Lim, and Farshid Navissi. "Managerial Ability, Financial Distress, and Audit Fees." Accounting Horizons 32, no. 1 (2017): 29–51. http://dx.doi.org/10.2308/acch-51888.

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SYNOPSIS This study examines whether the relationship between managerial ability and audit fees is conditional on financial distress. We find that higher managerial ability increases audit fees in financially distressed firms and decreases audit fees in non-distressed firms. We also observe that financially distressed firms with higher-ability managers display lower accrual quality and a higher likelihood of restatement. Moreover, higher-ability managers in distressed firms engage more in opportunistic financial reporting to concurrently maximize equity-based compensation and cope with debt refinancing pressures, which increases audit risks and results in greater audit fees. We confirm our results using a battery of sensitivity and additional analyses.

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9

Das, Sanjiv R., and Seoyoung Kim. "Going for Broke: Restructuring Distressed Debt Portfolios." Journal of Fixed Income 24, no. 1 (2014): 5–27. http://dx.doi.org/10.3905/jfi.2014.24.1.005.

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10

Guo, Xin, Robert A. Jarrow, and Haizhi Lin. "Distressed debt prices and recovery rate estimation." Review of Derivatives Research 11, no. 3 (2008): 171–204. http://dx.doi.org/10.1007/s11147-009-9029-2.

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11

Bernardo, Antonio E., Alex Fabisiak, and Ivo Welch. "Asset Redeployability, Liquidation Value, and Endogenous Capital Structure Heterogeneity." Journal of Financial and Quantitative Analysis 55, no. 5 (2019): 1619–56. http://dx.doi.org/10.1017/s0022109019000644.

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Firms with lower leverage are not only less likely to experience financial distress but are also better positioned to acquire assets from other distressed firms. With endogenous asset sales and values, each firm’s debt choice then depends on the choices of its industry peers. With indivisible assets, otherwise-identical firms may adopt different debt policies, with some choosing highly levered operations (to take advantage of ongoing debt benefits) and others choosing more conservative policies to wait for acquisition opportunities. Our key empirical implication is that the acquisition channel can induce firms to reduce debt when assets become more redeployable.

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12

Payne, Jennifer. "Debt Restructuring in the UK." European Company and Financial Law Review 15, no. 3 (2018): 449–71. http://dx.doi.org/10.1515/ecfr-2018-0014.

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Many jurisdictions around the world are seeking to develop an effective mechanism for rescuing financially distressed but viable businesses. In the UK a number of different mechanisms exist which can be used to restructure distressed companies. The purpose of this paper is to assess the debt restructuring mechanisms currently available to companies in English law and to consider the proposed reform of the UK regime, announced by the Government in August 2018. It is argued that reform is needed, and that in general the proposals to introduce a restructuring moratorium and a restructuring plan which includes a cross class cramdown are to be welcomed. However, these reforms will need to be introduced with care in order to ensure that an appropriate balance is maintained between the interests of the company and the interests of the creditors and that, ultimately, the UK’s regime remains fit for purpose for the future.

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13

Moraux, Franck, and Patrick Navatte. "Business Risk Targeting and Rescheduling of Distressed Debt." Finance 28, no. 2 (2007): 43. http://dx.doi.org/10.3917/fina.282.0043.

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14

Hyde, Mark, and Stephen Curtis. "Disclosure in distressed debt trading: practice makes perfect?" Law and Financial Markets Review 1, no. 5 (2007): 423–25. http://dx.doi.org/10.1080/17521440.2007.11427912.

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15

Noe, Thomas H., and Michael J. Rebello. "Reputation and the Market for Distressed Firm Debt." Journal of Financial and Quantitative Analysis 38, no. 3 (2003): 503. http://dx.doi.org/10.2307/4126729.

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16

Saleh, Norman Mohd, and Kamran Ahmed. "Earnings management of distressed firms during debt renegotiation." Accounting and Business Research 35, no. 1 (2005): 69–86. http://dx.doi.org/10.1080/00014788.2005.9729663.

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17

Moraux, Franck, and Patrick Navatte. "How do reservation prices impact distressed debt rescheduling?" Economic Modelling 46 (April 2015): 269–82. http://dx.doi.org/10.1016/j.econmod.2014.12.004.

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18

Makoto, Richard, Takawira Mumvuma, and Phineas G. Kadenge. "Public Debt Composition, Debt Policy Rules and Growth in Selected SADC Countries." Journal of Business and Social Review in Emerging Economies 6, no. 3 (2020): 1063–74. http://dx.doi.org/10.26710/jbsee.v6i3.1165.

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Purpose: This study examined the relative effect of debt composition and debt reduction policy rule on economic growth in selected SADC countries which are Mauritius, Tanzania and Zimbabwe. Design/Methodology/Approach The Markov-switching method was used to estimate the debt growth model for the period 1990Q1-2016Q4 Findings:. The effects of debt proved to be regime dependent which supports the time effects of debt in all countries. High external debt relative to domestic debt had positive effect on growth in Tanzania which is a good reforming country and had negative effects in the case of Zimbabwe which is a debt distressed country. In comparison to Mauritius, a domestic debt dependent country, high domestic debt relative to external debt had negative impact on growth. The effects tend to rise with market pressure and government consumption behaviour. A negative real effect of debt reduction policy rule was confirmed for Zimbabwe and irrelevance in countries with less threat of debt distress.  Implications/Originality/Value Therefore the study found support to the quantity-effect rather than type-effect of debt on growth. We recommended that countries should consider both time and quantity effects of debt in debt management; adopt explicit debt reduction rules which constrain fiscal behaviour and force policy commitment towards debt stabilization.

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19

Aitken, Rob. "The Sovereignty of Finance? Distress and the Financialization of Sovereign Debt." Perspectives on Global Development and Technology 18, no. 5-6 (2019): 493–526. http://dx.doi.org/10.1163/15691497-12341529.

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Abstract This article argues that the relationship between finance and state sovereignty is neither automatic nor understandable in some generalized manner. To develop this argument, I pay particular attention to the financialization of distressed sovereign debt, especially sovereign debt defaults in the Global South with particular reference to Argentina’s default in 2001 and the string of legal cases it triggered. These legal processes breathed a strange after-life into Argentina’s defaulted debt by converting that debt into fully commodified financial contracts. I argue that the financialization of sovereign debt is enabled by a long and complex evolution in the application of the doctrine of restrictive sovereign immunity. This financialization, moreover, is indicative of ways in which forms of financial distress are reworked as renewed sources of financial value. This provokes questions about the very relationship between waste and value in our global political economy.

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20

Tufano, Peter. "Business Failure, Judicial Intervention, and Financial Innovation: Restructuring U.S. Railroads in the Nineteenth Century." Business History Review 71, no. 1 (1997): 1–40. http://dx.doi.org/10.2307/3116328.

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This article describes the problems faced by reorganizers of distressed railroads in the late nineteenth century and how they were addressed by a combination of judicial intervention and financial innovations. In particular, the judicial innovations of supersenior financing, the equity receivership process, and the setting of upset values permitted firms to raise funds. The private financial innovations of deferred coupon debt, contingent charge securities, and voting trusts made subsequent default less likely. The private innovations can be interpreted as responses to both the distress of the railroads as well as the intervention by the courts that emasculated prior debt contracts.

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21

Sackley, William H. "Prospects and Risks of Investing in Asian Distressed Debt." CFA Digest 32, no. 2 (2002): 92. http://dx.doi.org/10.2469/dig.v32.n2.1093.

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22

Fridson, Martin S. "Distressed Debt Analysis: Strategies for Speculative Investors (a review)." Financial Analysts Journal 62, no. 3 (2006): 72. http://dx.doi.org/10.2469/faj.v62.n3.4160.

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23

Moore, Meridee. "Distressed-Debt Markets: Is It Darkest before the Dawn?" CFA Institute Conference Proceedings Quarterly 26, no. 1 (2009): 62–69. http://dx.doi.org/10.2469/cp.v26.n1.6.

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24

Václav, Klepac, and Hampel David. "Predicting financial distress of agriculture companies in EU." Agricultural Economics (Zemědělská ekonomika) 63, No. 8 (2017): 347–55. http://dx.doi.org/10.17221/374/2015-agricecon.

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The objective of this paper is the prediction of financial distress (default of payment or insolvency) of 250 agriculture business companies in the EU from which 62 companies defaulted in 2014 with respect to lag of the used attributes. From many types of classification models, there was chosen the Logistic regression, the Support vector machines method with the RBF ANOVA kernel, the Decision Trees and the Adaptive Boosting based on the decision trees to acquire the best results. From the results, it is obvious that with the increasing distance to the bankruptcy, there decreases the average accuracy of the financial distress prediction and there is a greater difference between the active and distressed companies in terms of liquidity, rentability and debt ratios. The Decision trees and Adaptive Boosting offer a better accuracy for the distress prediction than the SVM and logit methods, what is comparable to the previous studies. From the total of 15 accounting variables, there were constructed classification trees by the Decision Trees with the inner feature selection method for the better visualization, what reduces the full data set only to 1 or 2 attributes: ROA and Long-term Debt to Total Assets Ratio in 2011, ROA and Current Ratio in 2012, ROA in 2013 for the discrimination of the distressed companies.

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25

Andritzky, Jochen, and Julian Schumacher. "Long-Term Returns in Distressed Sovereign Bond Markets." IMF Working Papers 19, no. 138 (2019): 1. http://dx.doi.org/10.5089/9781498317375.001.

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Sovereign debt restructurings are perceived as inflicting large losses to bondholders. However, many bonds feature high coupons and often exhibit strong post-crisis recoveries. To account for these aspects, we analyze the long-term returns of sovereign bonds during 32 crises since 1998, taking into account losses from bond exchanges as well as profits before and after such events. We show that the average excess return over risk-free rates in crises with debt restructuring is not significantly lower than the return on bonds in crises without restructuring. Returns differ considerably depending on the investment strategy: Investors who sell during crises fare much worse than buy-and-hold investors or investors entering the market upon signs of distress

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26

Giriati, Giriati. "Turnaround Prediction Model with Content Dimension on Financial Distressed Firms." GATR Journal of Finance and Banking Review VOL. 5 (4) JAN-MAR. 2021 5, no. 4 (2021): 36–42. http://dx.doi.org/10.35609/jfbr.2021.5.4(4).

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Objectives - This article aims to examine the influence of content dimensions of Organization Change Theory, such as CEO Expertise, Free Assets, Debt to Equity Ratio and Growth of Sales, on a company’s turnaround ability when it is experiencing financial distress. The companies examined are listed on the Indonesian Stock Exchange (IDX). Methodology/Technique - The population used in this study is companies from sectors excluding the finance sector that were listed on the Indonesian Stock Exchange between 2013 and 2018. The sample size was determined using purposive sampling method. From the 109 companies that experienced financial distress, 57 have successfully turned their business around. The research data was collected from the ICMD (Indonesian Capital Market Directory), which was then analysed using multi regression technique analysis, using SPSS software to examine the determinants of company turnaround ability. Finding - The results indicate that CEO Expertise, Debt to Equity Ratio and Growth of Sales have a negative relationship on a company’s turnaround ability. Meanwhile, Free Assets has a positive and significant relationship on a company’s turnaround ability. Novelty - Previous studies have been conducted in many western countries, giving rise to researchers' doubts about the generalizability of research based on previous research findings when applied in developing countries such as Indonesia, particularly due to differences in regulations, conditions of distress, culture, financial systems and strategies used in overcoming distress. Type of Paper: Empirical. JEL Classification: B26, G15, P34. Keywords: Financial Distress; Turnaround Model; CEO Expertise; Free Assets; Debt to Equity Ratio; Growth of Sales Reference to this paper should be made as follows: Giriati, S.E, M.E. (2021). Turnaround Prediction Model with Content Dimension on Financial Distressed Firms, Journal of Finance and Banking Review, 5 (4): 36 – 42. https://doi.org/10.35609/jfbr.2021.5.4(4)

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27

O'Neill, Siobhan, Edel Ennis, Danielle McFeeters, and Lia Gallagher. "Financial Sector Workers' Experiences of Managing Suicidal Clients." Crisis 39, no. 3 (2018): 159–65. http://dx.doi.org/10.1027/0227-5910/a000483.

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Abstract. Background: Financial sector workers interface with indebted clients, who may be distressed and have heightened vulnerability to suicidality. Aim(s): This study examined the experiences of 10 Irish financial sector workers who had experiences of encountering distressed clients who discuss suicide. Method: Semistructured interviews (open-ended questions) were used. Results: Interpretative phenomenological analysis (IPA) identified four themes, namely: (1) avoidance versus confrontation of reality (management of the debt); (2) role conflict (recovering the debt vs. supporting the client); (3) emotional impact and distancing from clients (coping with concerns for client welfare); (4) desire for support (practical and emotional training and support needs). Limitations: The frequency with which such clients were encountered was not assessed. Conclusion: These themes demonstrate the need to provide support to this group, and also the difficulties in providing training to manage suicidal clients in a context where the staff member's goal is to recover debt.

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28

BEDENDO, MASCIA, LARA CATHCART, and LINA EL-JAHEL. "Distressed Debt Restructuring in the Presence of Credit Default Swaps." Journal of Money, Credit and Banking 48, no. 1 (2016): 165–201. http://dx.doi.org/10.1111/jmcb.12294.

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29

Altman, Edward I., José F. González-Heres, Ping Chen, and Steven S. Shin. "The Return/Volatility Trade-Off of Distressed Corporate Debt Portfolios." Journal of Portfolio Management 40, no. 2 (2014): 69–85. http://dx.doi.org/10.3905/jpm.2014.40.2.069.

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30

Liang, Liang, Shuzhen Chen, and Desheng Dash Wu. "A Decision Support Approach to Liquidate a Distressed Debt Network." IEEE Transactions on Systems, Man, and Cybernetics: Systems 50, no. 4 (2020): 1242–51. http://dx.doi.org/10.1109/tsmc.2017.2712623.

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31

Vasil'ev, V. "Anti-Crisis Policies of A. Merkel in Framework of European Union." World Economy and International Relations, no. 5 (2013): 56–66. http://dx.doi.org/10.20542/0131-2227-2013-5-56-66.

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The article explores specific political aspects of the policy line pursued by the FRG Chancellor A. Merkel as aimed to overcome the debt crisis in the debt-distressed countries of the European Union and to sustain the unity of Europe. It analyzes particular features of policy by the German Chancellor towards partners and competitors in the conditions of the European crisis.

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32

Salehi, Mahdi, and Mohsen Sehat. "Debt maturity structure, institutional ownership and accounting conservatism." Asian Journal of Accounting Research 4, no. 1 (2019): 35–51. http://dx.doi.org/10.1108/ajar-05-2018-0001.

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Purpose The purpose of this paper is to examine the impact of debt maturity structure and types of institutional ownership on accounting conservatism by using different financial variables and proxies. Design/methodology/approach Employing panel data analysis in the R programming language, the authors test their hypotheses on a sample of 143 (858 firm-year observations) companies listed on the Tehran Stock Exchange during 2011–2016. Findings Using Basu (1997) and Beaver and Ryan (2000) models as proxies for accounting conservatism, the findings suggest a non-significant relationship between accounting conservatism and debt maturity structure. Contrary to the primary expectation, the results indicate that short-maturity debts are also non-significantly and negatively associated with accounting conservatism in financially distressed firms. Finally, using both conservatism measures, the authors document that there is no significant relationship between both active and passive institutional ownership and accounting conservatism as well as debt maturity structure. Originality/value The current study is the first study conducted in a developing country like Iran, and the outcomes of the study may be helpful to other developing nations.

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33

Badoer, Dominique C., Evan Dudley, and Christopher M. James. "Priority Spreading of Corporate Debt." Review of Financial Studies 33, no. 1 (2019): 261–308. http://dx.doi.org/10.1093/rfs/hhz045.

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Abstract Priority spreading refers to the practice of firms increasing their reliance on secured and subordinated debt and reducing their reliance on senior debt as their credit quality deteriorates. We argue that priority spreading occurs because security provides creditors with greater protection from dilution from other creditors than do covenants that prioritize payments. Consistent with this argument, we find that secured bank creditors are rarely diluted by junior creditors in distressed restructurings, whereas senior unsecured creditors are frequently diluted, exogenous increases in asset volatility result in greater priority spreading and yields on senior and subordinated bonds converge as asset volatility increases. Received January 22, 2018; editorial decision January 27, 2019 by Editor David Denis. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

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34

Lehavy, Reuven, and Suneel Udpa. "Kmart: Predicting Bankruptcy, Fresh Start Reporting, and Valuation of Distressed Securities." Issues in Accounting Education 26, no. 2 (2011): 391–419. http://dx.doi.org/10.2308/iace-10017.

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ABSTRACT On January 22, 2002, Kmart Corporation filed voluntary petitions for reorganization under Chapter 11 of the federal bankruptcy laws. While under Chapter 11 protection, Kmart renegotiated its debt, shed some of its non-performing assets, and issued new equity. Financier Eddie Lampert of ESL Investments bought much of Kmart's debt for less than $1 billion while it was in bankruptcy. As part of the reorganization plan, virtually all of Kmart's debt was converted into shares, and ESL Investments emerged as Kmart's largest shareholder. Subsequent to its emergence from bankruptcy on May 6, 2003, Kmart's stock has gone up from around $15/share to nearly $80/share over a period of one year. The case requires students to analyze Kmart's financial performance prior to the bankruptcy, identify the circumstances leading to the bankruptcy, use projected financial statements to derive Kmart's value post-bankruptcy, and explore issues related to Kmart's adoption of Fresh Start reporting upon its emergence from bankruptcy. The case questions fall into five categories: (1) pre-bankruptcy evaluation, (2) reorganization plan and Kmart in bankruptcy, (3) Fresh Start reporting, (4) bankruptcy valuation analysis, and (5) post-bankruptcy performance. The questions are largely independent, allowing instructors the flexibility to adopt only the sections relevant to their courses.

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35

Kobal, Michael. "The Distressed Corporate Debt Cycle from a Hedge Fund Investor's Perspective." CFA Digest 39, no. 1 (2009): 8–10. http://dx.doi.org/10.2469/dig.v39.n1.11.

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36

Aliuddin, Sadaf. "A Primer on Distressed Investing: Buying Companies by Acquiring Their Debt." CFA Digest 43, no. 2 (2013): 26–28. http://dx.doi.org/10.2469/dig.v43.n2.55.

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37

Chen, Ping, José F. González-Heres, and Steven S. Shin. "The Distressed Corporate Debt Cycle from a Hedge Fund Investor's Perspective." Journal of Alternative Investments 11, no. 1 (2008): 23–42. http://dx.doi.org/10.3905/jai.2008.708848.

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38

Moyer, Stephen G., David Martin, and John Martin. "A Primer on Distressed Investing: Buying Companies by Acquiring Their Debt." Journal of Applied Corporate Finance 24, no. 4 (2012): 59–76. http://dx.doi.org/10.1111/j.1745-6622.2012.00401.x.

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39

Ahmed, Kamran, and Norman Mohd Saleh. "Accounting choices of distressed firms during debt renegotiation: evidence from Malaysia." International Journal of Accounting, Auditing and Performance Evaluation 4, no. 6 (2007): 589. http://dx.doi.org/10.1504/ijaape.2007.017456.

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40

Dobbie, Will, and Jae Song. "Targeted Debt Relief and the Origins of Financial Distress: Experimental Evidence from Distressed Credit Card Borrowers." American Economic Review 110, no. 4 (2020): 984–1018. http://dx.doi.org/10.1257/aer.20171541.

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We study the drivers of financial distress using a large-scale field experiment that offered randomly selected borrowers a combination of (i) immediate payment reductions to target short-run liquidity write-downs to target long-run debt constraints. We identify the separate effects of the payment reductions and interest write-downs using both the experiment and cross-sectional variation in treatment intensity. We find that the interest write-downs significantly improved both financial and labor market outcomes, despite not taking effect for three to five years. In sharp contrast, there were no positive effects of the more immediate payment reductions. These results run counter to the widespread view that financial distress is largely the result of short-run constraints. (JEL G56, K35)

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41

Singh, Manmohan. "Recovery Rates From Distressed Debt: Empirical Evidence From Chapter 11 Filings, International Litigation, and Recent Sovereign Debt Restructurings." IMF Working Papers 03, no. 161 (2003): 1. http://dx.doi.org/10.5089/9781451857832.001.

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42

Trebesch, Christoph, and Jeromin Zettelmeyer. "ECB Interventions in Distressed Sovereign Debt Markets: The Case of Greek Bonds." IMF Economic Review 66, no. 2 (2018): 287–332. http://dx.doi.org/10.1057/s41308-018-0051-y.

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43

Brown, David T., Christopher M. James, and Robert M. Mooradian. "The information content of distressed restructurings involving public and private debt claims." Journal of Financial Economics 33, no. 1 (1993): 93–118. http://dx.doi.org/10.1016/0304-405x(93)90026-8.

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44

Ssebagala, Ralph Abbey. "Relieving Consumer Overindebtedness in South Africa: Policy Reviews and Recommendations." Journal of Financial Counseling and Planning 28, no. 2 (2017): 235–46. http://dx.doi.org/10.1891/1052-3073.28.2.235.

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A large fraction of South African consumers are highly leveraged, inadequately insured, and/or own little to no assets of value, which increases their exposure not only to idiosyncratic risk but also to severe indebtedness and/or default. This scenario can present negative ramifications that lead well beyond the confines of individual households. Thankfully, it can also be remedied by well-tailored legal debt relief mechanisms. This article reflects on the uncertainties surrounding the consumer debt relief framework of the National Credit Act in an attempt to show why it is not up to the challenge of providing meaningful relief to debt-distressed consumers. Ultimately, a comprehensive review of the current framework in favor of a discharge mechanism on simple, stated terms is proposed.

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45

Mior Ahmed Shahimi, Wan Rozima, Ahmad Harith Ashrofie Hanafi, and Nurul Afidah Mohamad Yusof. "THE IMPACT OF COVID-19 ON THE FINANCIAL PERFORMANCE OF PN17 AND GN3 STATUS FIRMS: DOES IT ADD SALT INTO THE WOUND?" Advanced International Journal of Banking, Accounting and Finance 3, no. 7 (2021): 47–58. http://dx.doi.org/10.35631/aijbaf.37004.

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The Covid-19 pandemic has brought about major changes to the Malaysian economic landscape in terms of productivity level, investment, and household spending. Nonetheless, the unprecedented presence of Covid-19 has caused an unexpected level of disruption to firms from a liquidity and leverage perspective that impacts financial performance. This study focused on financially distressed firms classified under PN17 and GN3 by Bursa Malaysia. Hence, the aim of this study is to examine the impact of liquidity, leverage, and the Covid-19 pandemic period on the financial performance of financially distressed firms in Malaysia which are classified as PN17 and GN3 firms. By using liquidity ratios, financial leverage ratios, and a dummy variable of Covid-19, the result showed that the current ratio, net working capital, and debt ratio were found significant to affect the financial performance. Meanwhile, there is no significant evidence to support that the Covid-19 pandemic has an impact on the performance of financially distressed firms. The finding indicates that the financially distressed firm’s financial performance was purely due to bad management practices, and not contributed by the Covid-19 pandemic.

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Lim, Jongha. "The Role of Activist Hedge Funds in Financially Distressed Firms." Journal of Financial and Quantitative Analysis 50, no. 6 (2015): 1321–51. http://dx.doi.org/10.1017/s0022109015000435.

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AbstractIn this paper I investigate the role of activist hedge funds in the restructuring of a sample of 469 firms that attempted to resolve distress either out of court, in conventional Chapter 11, or via prepackaged restructuring. Activist hedge funds strategically gain a position of influence in the restructuring of economically viable firms with contracting problems that prevent efficient restructuring without outside intervention. I find that hedge fund involvement is associated with a higher probability of completing prepackaged restructurings, faster restructurings, and greater debt reduction. Overall, the evidence in this article suggests that activist hedge funds can create value by enabling more efficient contracting.

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Parkinson, Marjan Marandi. "Corporate governance during financial distress – an empirical analysis." International Journal of Law and Management 58, no. 5 (2016): 486–506. http://dx.doi.org/10.1108/ijlma-08-2015-0045.

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Purpose The traditional form of legal research with its predominant emphasis on doctrinal and theoretical analysis is now increasingly augmented by empirical research that seeks to document actions and decisions and draw broader conclusions. This relatively new research tradition is arguably making a positive contribution to legal theory and practice, particularly in the USA [for a general discussion see SJ Lubben, “Do Empricial Bankruptcy Studies Matter?” (2012) 20 ABI L Rev 715]. The paper aims to report on the use of empirical research to examine corporate governance in the context of financially distressed UK public companies. Design/methodology/approach The paper uses statutory corporate filings and mandatory stock exchange reports to document the process of informal debt resolution prior to the company’s entry into administration or Company Voluntary Arrangement. The findings are presented in an innovative way as a series of case studies focusing on process, participants and outcomes of informal debt resolution. Findings The paper concludes that it is possible to use case study research as a means to explore corporate governance in the context of financially distressed companies. Although such an approach is challenging in various ways, there are some advantages that complement more traditional research approaches. The findings show how directors’ attention shifts away from shareholders’ interests to those of creditors at times of financial distress and challenges conventional models of governance that stress shareholder value. Originality/value The distinctive features of the research are the development of a case-study based approach that draws on publicly available data sources, a process based analysis and a synthesis of corporate governance and law.

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Chan, Toong Khuan, and Abdul-Rashid Abdul-Aziz. "Financial performance and operating strategies of Malaysian property development companies during the global financial crisis." Journal of Financial Management of Property and Construction 22, no. 2 (2017): 174–91. http://dx.doi.org/10.1108/jfmpc-02-2016-0009.

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Purpose The purpose of this paper is to characterise the financial performance and to identify the operating strategies of property development companies in Malaysia during the 2008 global financial crisis (GFC). Design/methodology/approach The research approach includes a comprehensive analysis of the financial statements and annual reports of 35 property development companies listed on the Kuala Lumpur stock exchange. The financial statements were analysed to evaluate the financial performance of these companies and to assess the severity of the impact of the GFC on revenues and profits. The operating strategies were determined from a content analysis of the statement to shareholders. Findings An aggregated analysis of the financial performance indicates a 23 per cent decline in net profit in 2008. Classifying these companies into two separate sets of distressed and non-distressed companies showed that poor financial performance and a high debt-to-equity ratio pre-GFC led to continuing poor performance during the GFC period and beyond. Survival strategies adopted by distressed companies include the disposal of assets to improve cash flow, refinancing loans, delaying the launch of new projects and reducing their workforce. Non-distressed companies adopted growth strategies such as purchasing land for development, focusing their offerings towards high-end products, vertically integrating and diversification. Practical implications The increased understanding of the financial performance and operational strategies will allow managers of property development companies to improve financial management and adopt appropriate strategies in response to the impact of future financial distress. Originality/value The study presented in this paper is the first to analyse the financial performance of Malaysian public-listed property development companies during the period of the 2008 GFC and to link their financial performance to operational strategies.

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Mba, Sanford U. "Preventive Debt Restructuring and the Nigerian Draft Insolvency Legislation: Lessons from a Comparative Perspective." African Journal of International and Comparative Law 28, no. 1 (2020): 66–84. http://dx.doi.org/10.3366/ajicl.2020.0302.

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Recently, the Nigerian Senate passed the Bankruptcy and Insolvency (Repeal and Re-enactment) Bill. This is no doubt a welcome development following the continued demand by insolvency practitioners, academics and other stakeholders for such legislation. The call has not only been for the enactment of just about any legislation, but (consistent with the economic challenges faced by businesses in the country), one that is favourably disposed to the successful restructuring of financially distressed businesses, allowing them to weather the storm of (impending) insolvency, emerge from it and continue to operate within the economy. This article seeks to situate this draft legislative instrument within the present wave of preventive restructuring ably espoused in the European Union Recommendation on New Approaches to Business Rescue and to Give Entrepreneurs a Second Chance (2014), which itself draws largely from Chapter 11 of the US Bankruptcy Code. The article draws a parallel between the economic crisis that gave rise to the preventive restructuring approach of the Recommendation and the present economic situation in Nigeria; it then examines the chances of such restructuring under the Nigerian draft bankruptcy and insolvency legislation. It argues in the final analysis that the draft legislation does not provide for a prophylactic recourse regime for financially distressed businesses. Consequently, a case is made for such an approach.

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Srivastava, Vikas. "Distressed debt investments in India: what more needs to be done to strengthen regulations." International Journal of Indian Culture and Business Management 18, no. 3 (2019): 368. http://dx.doi.org/10.1504/ijicbm.2019.099289.

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