Abstract
The current study sheds additional light on how and when firms improve their performance after having filed for Chapter 11 reorganization protection. Based on the work of Hrebiniak and Joyce [Administrative Science Quarterly 30 (1985) 336] and Marlin, Lamont and Hoffman [Strategic Management Journal 15 (1994) 229], a framework is developed that identifies which distressed firms have the best chances of surviving bankruptcy and the extent to which refocusing, a popularly prescribed remedy for these ailing firms, will aid their plight. The results demonstrate the utility of viewing bankruptcy reorganizations as different choice situations, where firms have varying levels of strategic choice, determined largely by their stockpiles of redeployable resources, and face different degrees of environmental constraint. Only firms with relatively high strategic choice or low environmental constraint were found to benefit from refocusing actions. That is, the performance effects of at least one popular remedy, refocusing-type business portfolio initiatives, appear contingent on the choice situation confronting firms under Chapter 11 protection.
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