Abstract
On October 10, 2016, Fushun Special Steel issued a notice announcing that its controlling shareholder, Northeast Special Steel, entered the bankruptcy reorganization process due to nine consecutive defaults and nearly 5.8 billion RMB in liabilities. Bankruptcy reorganization can help solve the debt problems faced by such inefficient zombie firms, and restore their ability of sustainable operation and profitability. However, since reorganization effects only a change in debt structure and of stakeholder composition, whether the newborn entity has the ability to manage and operate the firm is critical. Therefore, the reorganization can only solve the institutional problems but not the managerial problems; that is, institutional reorganization cannot be automatically converted into behavioral change. Thus, when analyzing the implementation process of reorganization from the perspective of firm management, several questions arise: who should take control in the process of reorganization? How should the organizational structure of the restructuring firm be reorganized? How to reconfigure the internal human resources of the firm? Whether the former industry leader can properly handle these problems in the reorganization process is worthy of further discussion.
Highlights
On October 10, 2016, Fushun Special Steel issued a notice announcing that its controlling shareholder, Northeast Special Steel, entered the bankruptcy reorganization process due to nine consecutive defaults and nearly 5.8 billion RMB in liabilities
In order to solve the above-mentioned problems concerning the reorganization of ownership and corporate control, in the process of bankruptcy reorganization, Northeast Special Steel should absorb the advanced knowledge and experience of firm management, take the measure of ownership-control separation, and find talents with excellent managerial decision-making ability to operate the firm
In terms of the arrangement of control rights, the treatment of the problems of large state-owned firms like Northeast Special Steel that have lost their survival ability, attention must be paid to the issue of control rights arrangements, and the separation of ownership and control
Summary
The reorganization system is considered by many researchers as an effective means to save the “zombie firm” in distress, and a helpful solution to their debt problem, reorganization is only one of the many important aspects of firm management. The process of bankruptcy reorganization involves all the levels and all the management chains, from top to bottom, from the strategic layer to the executive layer, from the organizational structure to human resources management. If these problems are not properly handled during the integration process, integration problems may occur in aspects such as business operations, firm organization, firm culture, and management flow.
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