Global Crises and Corporate Reorganisation Methods

Abstract

Despite many regulatory changes there are still no sound reorganisation possibilities for financially distressed companies in Hungary. The current crisis of 2020 due to the pandemic is going to trigger mass liquidations especially there where the bankruptcy rules are ineffective. There is no efficient risk and resource allocation if there is no reasoning and the financial and economic criteria necessary for a proper bankruptcy management are not taken into consideration in the reorganisation procedure. This article is based on primary research conducted in 2014 and a further analysis of the problem published in the Eurasian Studies in Business and Economics in 2020 (Pálinkó and Pétervári, 2020). The conclusion is that the financial variables are seemingly irrelevant in decision-making. The bankruptcy procedure has become a useful tactic for the owner-management to keep their position and protected status for as long as possible even at the expense of the divergent creditors. There is a genuine need for a different model in Hungary, one in which financially rational decisions are not dysfunctional. We have found that time is the most important factor here. It is therefore suggested that the rules should be designed so that the companies be motivated to file for bankruptcy in time. This design is the automated mandatory auction bankruptcy procedure or its pre-pack version.