KEY SUCCESS FACTORS IN THE REVITALIZATION OF DISTRESSED FIRMS: A CASE OF THE KOREAN CORPORATE WORKOUTS

Abstract

Journal of Restructuring FinanceVol. 01, No. 02, pp. 311-338 (2004) ARTICLESNo AccessKEY SUCCESS FACTORS IN THE REVITALIZATION OF DISTRESSED FIRMS: A CASE OF THE KOREAN CORPORATE WORKOUTSDONGSOO KANGDONGSOO KANGKorea Development Institute 207-41, Chongnyangri-Dong, Dongdaemun-Gu, Seoul, South Korea Search for more papers by this author https://doi.org/10.1142/S0219869X04000263Cited by:0 PreviousNext AboutSectionsPDF/EPUB ToolsAdd to favoritesDownload CitationsTrack CitationsRecommend to Library ShareShare onFacebookTwitterLinked InRedditEmail AbstractThis paper explores the empirical performances of the workout companies with special interests in the effectiveness of corporate reorganizing tools on their revitalization. In the empirical analysis it considers the criteria of success or failure in restructuring from both creditors' and debtors' perspectives in a separate manner. The key results are summarized as follows. First, the initial conditions on the debt structure of the workout companies are significantly related to the revitalization from both creditors' and debtors' point of view. Second, the debt restructuring instruments are insignificant in the success of corporate turnarounds, but the debt-to-equity conversion has been a relatively effective tool. Third, the self-restructuring efforts, employment downsizing, and governance reshuffling do not affect the performances significantly.Keywords:Corporate distresscorporate workoutsreorganizationJEL Classification: G34JEL Classification: G38JEL Classification: C35 References C. Adams , R. E. Litan and M. Pomerleano , Managing Financial and Corporate Distress: Lessons from Asia ( Brookings Institution Press , 2000 ) . Google ScholarE. C. Altman, Journal of Finance (1968). Google Scholar J. Bhandari and L. Weiss , Corporate Bankruptcy: Economic and Legal Perspectives ( Cambridge University Press , 1996 ) . Crossref, Google Scholar M. Dado and D. Klingebiel , Decentralized Creditor Led Corporate Restructuring: Cross Country Experiences ( Worldbank , 2000 ) . Google Scholar Financial Supervisory Service (2003). A Five-Year Experience on the Corporate Workouts . Google Scholar P. A. Gaughan , Mergers, Acquisitions and Corporate Restructurings , 2nd edn. ( John Wiley & Sons, Inc. , 1999 ) . Google ScholarJ. Gilson and Lang, Journal of Financial Economics 27(1990), 315 (1990), DOI: 10.1016/0304-405X(90)90059-9. Crossref, Google ScholarJ.-H. Hahm and F. S. Mishkin, The Korean Crisis: Before and After, ed. I. Shin (Korea Development Institute, Seoul, 2000) pp. 55–144. Google ScholarE. S. Hotchkiss, Journal of Finance 50(1995), 3 (1995), DOI: 10.2307/2329237. Crossref, Google Scholar J.-R. Jeong and E.-J. Hong , Distressed Assets Resolution: A New Frontier of Financial Industry ( Samsung Economic Research Institute , 2003 ) . Google ScholarS. W. Joh, The Korean Crisis: Before and After, ed. I. Shin (Korea Development Institute, Seoul, 2000) pp. 185–213. Google ScholarD. Kang and S. Hahn, Journal of Korean Economic Analysis 7, 121 (2001). Google Scholar P. Kent , Corporate Workouts — A UK Perspective ( Bank of England , 1997 ) . Crossref, Google ScholarJ.-K. Kim, Journal of Restructuring Finance 1(2), 289 (2004), DOI: 10.1142/S0219869X04000251. Link, Google Scholar Korea Development Bank (2002). Case Studies on Corporate Restructuring . Google Scholar S.-K. Lee , Explanations on the Corporate Workouts for Restructuring Specialists ( Corporate Restructuring Coordination Committee , 2000 ) . Google Scholar Nam, I. C., J.-K. Kim, Y. Kang, S. W. Joh and J.-I. Kim (1999). Corporate Governance in Asia: A Comparative Perspective. OECD Conference Report . Google ScholarJ. Nam, Journal of Finance Studies 12, (1998). Google Scholar , Symposium on Building Effective Insolvency Systems ( 1999 ) . Google Scholar FiguresReferencesRelatedDetails Recommended Vol. 01, No. 02 Metrics History KeywordsCorporate distresscorporate workoutsreorganizationJEL Classification: G34JEL Classification: G38JEL Classification: C35PDF download