Bankrupt Companies Research Articles

Oh, that Hertz: Protecting Unsophisticated Investors from Buying Stock in Bankrupt Companies

In United States bankruptcies, the absolute priority rule dictates that shareholders recover no value unless creditors are paid in full. Because unsecured creditors are typically not paid in full, shareholders lose their ownership interest and recover little-to-nothing in bankruptcy. Despite the minuscule chances that debtors’ shareholders will recover their investment in bankruptcy, debtors’ stock continues to trade in large volume during bankruptcy. Amateur investors, who know little about the small chance of shareholder recovery, buy bankrupt company stock, especially that of well-known public companies trading at low prices from sophisticated, institutional investors. Consequently, amateur investors can see huge losses during the bankruptcy process, while institutional investors are able to hedge some of their losses from the now insolvent company. The current public and private regulatory regimes do not have the authority or desire to protect amateur investors trading bankrupt company stock. This Note proposes that Congress adopt an amendment to the Bankruptcy Code that grants bankruptcy courts a limited power to suspend trading in a company’s stock after it files for bankruptcy. In order to trigger this measure, the courts must determine that shareholders are likely to receive little-to-no value in bankruptcy and that amateur investors will ignorantly purchase such bankrupt company stock. This Note then discusses the proposed amendment and its potential consequences, and responds to expected criticisms of the amendment.

Early warning indicators: An empirical investigation in Italian context and first implications for corporate governance

The aim of this paper is to map the exposure to the risk of financial distress and insolvency of Italian companies during 2019 by monitoring the five early warning indicators defined by the National Council of Chartered Accountants and Accounting Experts (CNDCEC) and approved by the Italian Ministry of Economic Development, in accordance with the provisions of the “Crisis and Insolvency Code” (IC-Code). The methodology used to conduct these investigations consists of comparing the average value of each early warning indicator for companies belonging to a specific commodity-related sector to the threshold value established for each sector, in order to capture signs of potential financial distress. The results of the analysis show that Italian limited liability companies (LLC) and joint-stock companies (JSC) (listed and unlisted) in 2019 did not show particularly worrying signs of financial distress and insolvency. The results of the survey are relevant to national regulators, managers, investors, lenders and, more generally, market participants as they shed light on the type of commodity-related sectors in which economic and financial difficulties are more likely to occur. Moreover, the continuous monitoring process of the early warning indicators’ average values can provide valuable support to the CNDCEC to verify whether and how to modify/refine their thresholds, thus improving their ability to report foreseeable states of financial distress

Insolvency and financial health prediction model for the listed companies on the Indonesia Stock Exchange

An insolvency and financial health prediction model is an important warning to decision-makers. This study aims to design a model that provides numbers and ranges for prediction of company insolvency and financial health. The study population is all the listed companies on the Indonesia Stock Exchange, while the sample consists of 216 companies that had negative equity from 2010 to 2019 and 216 companies with positive equity. The independent variables include the solvency and profitability ratios in one and two years before the insolvency. Logistic regression was used as an analysis tool. The results are 24 prediction models. The comprehensive one revealing the solvency ratio in the previous one year and the profitability ratio in the previous one and two years can predict the probability of insolvency and financial health.

ANALISIS Z-SCORE DALAM MENGUKUR KINERJA KEUANGAN UNTUK MEMPREDIKSI KEBANGKRUTAN PERUSAHAAN MANUFAKTUR PADA MASA PANDEMI COVID-19

A manufacturing company is a business entity whose main activity is to process raw materials into finished goods, therefore they have a sale value. During the covid-19 pandemic, many manufacturing companies were threatened with bankruptcy. That is because the company’s performance has decreased. The purpose of this research is to compare how big the opportunities of PT. Astra International, PT. Mandom Indonesia, PT. Gudang Garam, and PT. Sri Rejeki Isman bankruptcy as a result of covid-19 by using the Altman z-score model. Financial distress is a situation where a company experiences liquidity difficulties or the ability to fulfill its obligations. Based on the results of PT. Astra International from 2016 to 2020 in the first quarter was potentially bankruptcy, while in the second quarter the company was based on the grey area. PT. Mandom Indonesia both in the first quarter and second quarter in healthy. PT. Gudang Garam in first quarter and second quarter in the grey area. PT. Sri Rejeki Isman in the first quarter and second quarter classified as a potentially bankrupt company.

Interaction between institutional technologies, wage guarantee schemes and corporate social responsibility in respect of the protection of workers’ benefits in case of company insolvency

The objective of this paper is the investigation of relationship and interaction between the companies’ insolvency and modern law regulations, social security systems based primarily on wage guarantee schemes and corporate social responsibility (CSR) practice. Evidence shows that despite the significant impact of the company’s insolvency on the personal and civic fate of the workers, the economic and social output still depends on legal regulations. Thus, differences between bankruptcy or restructuring laws in common and civil law countries in terms of their protection of various debtors’ claims have been analysed. The legal origin is not the only contributing factor to the social well-being and safety of people in case of insolvency. In spite the fact, that, as it was shown by J. Boter et al., consistently with the legal theory, patterns of regulation across countries are shaped largely by their legal structures, which were transplantated to most countries, effective implementation of their nationally developed and wellregulated guarantee schemes helps to eliminate the economic consequences of insolvency. Some examples of such regulations as the second element of the guarantee of workers’ benefits in case of company insolvency were also examined in the article. The assertion of the state of the art of disclosing social responsibility aspects of companies’ insolvency as a case of CSR and the search of answers to the question if the protection of pension and wage benefits in case of corporate insolvency is considered as one of the components of CSR was the third aspect discovered in the article. This aspect may be the basis for further study and practical implementation of disclosure requirements in non-financial reports and combined financial statements.

KEWAJIBAN PERUSAHAAN PAILIT DALAM PENYELESAIAN HAK-HAK KARYAWAN DITINJAU DARI UNDANG UNDANG NO 37 TAHUN 2004 TENTANG KEPAILITAN DAN UNDANG UNDANG NO 13 TAHUN 2003 TENTANG KETENAGAKERJAAN

The Manpower Law and the Bankruptcy Law are both specifically regulating laws and regulations, so that in practice the priority principle cannot be used because the two laws have the same position. This of course results in a conflict of norms which creates legal uncertainty for workers in obtaining their rights. The formulation of the problem in this research is the Obligations of Bankrupt Companies in Settling Employee Rights in terms of Law No. 37 of 2004 concerning Bankruptcy and Law No. 13 of 2003 concerning Manpower, and the Legal Consequences of Bankruptcy Company Obligations in Settling Employee Rights in Review From Law No. 37 of 2004 concerning Bankruptcy and Law No. 13 of 2003 concerning Manpower. The method used is normative legal research. Sources of data consist of primary legal materials, secondary legal materials, and tertiary legal materials. In this study the data were analyzed qualitatively and in drawing conclusions, the authors applied a deductive thinking method. The conclusion in this study has answered the problems that arise, namely the Obligations of the Bankrupt Company in Resolving Employee Rights in terms of Law No. 37 of 2004 concerning Bankruptcy and Law No. 13 of 2003 concerning Manpower, the Company still has responsibilities that must be fulfilled to employees. , both before and after the bankruptcy declaration was passed. Prior to the issuance of the bankruptcy decision, the Company is responsible for paying the outstanding employee's wages and other rights in full before the Company loses its authority to manage and transfer its assets by the curator. Employees are entitled to severance pay, period of service pay, and compensation, in addition, employees are also entitled to wages payable before and after the bankruptcy decision. Based on Article 39 paragraph (2) Bankruptcy explains that since the date of pronouncement of the bankruptcy declaration, the wages payable before and after the pronouncement of bankruptcy constitute a debt of bankruptcy assets. This provision is then strengthened by other provisions, namely Article 95 paragraph (4) of the Manpower Law which states that when a company is declared bankrupt, the wages and other rights of the worker / laborer are a debt with payment precedence. Legal Consequences of Bankruptcy Company Jurnal Ilmiah Ilmu Hukum QISTIE Vol. 13 No. 2 November 2020 243
 Obligations in Settling Employee Rights In terms of Law No. 37 of 2004 concerning Bankruptcy and Law No. 13 of 2003 concerning Manpower, the company represented by the board of directors still has the duty to assist in resolving bankruptcy assets at the request of the curator. This is done to achieve the aims and objectives of the Company for bankruptcy so that debts to creditors, including employees as preferred creditors, can be realized. Employees as Creditors who are privileged in this case depend heavily on the actions taken by the curator because employees do not have the authority to carry out the execution of material guarantees like those of the Separatist Creditors.

Predicting the Insolvency of SMEs Using Technological Feasibility Assessment Information and Data Mining Techniques

The government makes great efforts to maintain the soundness of policy funds raised by the national budget and lent to corporate. In general, previous research on the prediction of company insolvency has dealt with large and listed companies using financial information with conventional statistical techniques. However, small- and medium-sized enterprises (SMEs) do not have to undergo mandatory external audits, and the quality of accounting information is low due to weak internal control. To overcome this problem, we developed an insolvency prediction model for SMEs using data mining techniques and technological feasibility assessment information as non-financial information. We divided the dataset into two types of data based on three years of corporate age. The synthetic minority over-sampling technique (SMOTE) was used to solve the data imbalance that occurred at this time. Six insolvency prediction models were created using logistic regression, a decision tree, an artificial neural network, and an ensemble (i.e., boosting) of each algorithm. By applying a boosted decision tree, the best accuracies of 69.1% and 82.7% were derived, and by applying a decision tree, nine and seven influential factors affected the insolvency of SMEs established for fewer than three years and more than three years, respectively. In addition, we derived several insolvency rules for the two types of SMEs from the decision tree-based prediction model and proposed ways to enhance the health of loans given to potentially insolvent companies using these derived rules. The results of this study show that it is possible to predict SMEs’ insolvency using data mining techniques with technological feasibility assessment information and find meaningful rules related to insolvency.

INSOLVENCY OF INSURANCE COMPANIES IN UKRAINE: DETECTION AND PROGNOSTICATION

The paper demonstrates the results of research on the problems of insurance company insolvency. The outcomes describe the basic principles of detection and using the early warning system in Ukraine. The paper shows the necessity to reorganize the basic principles of the detection of local insolvent insurers. The study also determines the groups of persons who are directly or indirectly interested in the insurer's solvency assessment. This work presents the system of insurance companies' insolvency indicators, which help to identify insolvency at the early stages. The paper distinguishes precautionary, delayed, internal, and external insolvency indicators of insurers. The study divides the values of insurer's insolvency indicators into "yellow" and "red" zones to increase the flexibility of using various instruments for influencing by the regulator depending on the level of danger of the insurance company. This work argues for taking timely measures to the threat of insolvency of the insurance companies by the insurance supervisor.Key words: insolvency, instability of the insurers, solvency, early warning system, insurance market.

Assessment of Trajectories of Non-bankrupt and Bankrupt Enterprises

The aim of this study is to show how long-term trajectories of enterprises can be used to increase the forecasting horizon of bankruptcy prediction models. The author used seven popular forecasting models (two from Europe, two from Asia, two from North America and one from Latin America). These models (five multivariate discriminant analysis models and two logit models) were used to develop 17-year trajectories separately for non-bankrupt enterprises and those at risk of financial failure. Based on a sample of 200 enterprises, the author evaluated the differences between non-bankrupt and bankrupt firms in development during 17 years of activity. The long-term usability of the models was demonstrated. To date, these models have been used only to forecast bankruptcy risk in the short term (1–3 years’ prediction horizon). This paper demonstrates that these models can also serve to evaluate long-term growth and to identify the first symptoms of future bankruptcy risk many years before it actually occurs. It was proven and specified that long-term developmental differences exist between non-threatened and future insolvent companies. These studies proved that the process of going bankrupt is very long, perhaps even longer than the literature has previously demonstrated. This study is one of the first attempts in the literature globally to assess such long-term enterprise trajectories. Additionally by implementing a dynamic approach to the financial ratios in the risk-forecasting model let visualize the changes occurring in the company.

Анализ основных тенденций современной практики применения процедуры банкротства бизнеса в Российской Федерации и проблемы ее развития

Global economic instability increases the relevance of studying the dynamics of initiation and applica-tion of bankruptcy procedures in Russia and abroad. The author of the paper summarizes statistical data over the last few years that allowed us to identify the main problems of the development of bankruptcy cases in Russia. The analysis showed that, against the background of extremely low efficiency of bank-ruptcy procedures for Russian enterprises, the indi-cators of our country in terms of the number of bankrupt companies generally correspond to global indicators. It is concluded that the timely identifica-tion of the crisis state should play a key role in anti-crisis business management. In this regard, it be-comes important to find ways and methods of fore-casting and assessing the probability of bankruptcy both at the national and intra-corporate levels.

Evaluation of the payability of Russian companies and practice of using their bankruptcy procedures

In modern business conditions, an increasing number of Russian companies have problems with solvency, as a result of which they are forced to go into bankruptcy proceedings. In such conditions, it seems important to develop the rehabilitation potential of business bankruptcy. The objectives of the work are to identify the reasons for the low solvency of Russian companies, as well as the rare use of bankruptcy rehabilitation procedures and their low effectiveness, which will allow us to identify new approaches to the development of the rehabilitation, including health, bankruptcy potential. In the course of the study, a comprehensive and systematic approach to the studied processes and phenomena was applied, which are implemented by means of general scientific methods: scientific abstraction, analysis and synthesis. The use of standard analytical methods (comparison, summaries and groupings) made it possible to assess the solvency of Russian companies, their participation in bankruptcy proceedings and the effectiveness of bankruptcy proceedings. The study made it possible to conclude that today the activities of the overwhelming majority of insolvent Russian companies are completed with the help of bankruptcy proceedings, while the main function of bankruptcy rehabilitation procedures is solely in debt repayment extended over time, which requires further improvement by adding a vector to preservation and development of the debtor's business. The results of the study can be used in analytical practice, as well as to develop new approaches to the development of the rehabilitation potential of bankruptcy proceedings.

Capital Structure of Insolvent Companies in the Czech Republic

Capital Structure of Insolvent Companies in the Czech Republic

Perlindungan Hukum Terhadap Hak-Hak Karyawan Tetap Dalam Hal Terjadi Pemutusan Hubungan Kerja (PHK) Menurut Undang-Undang Nomor 13 Tahun 2003

In a work relationship such as other legal relationships it does not always run smoothly,because the wishes of one party (generally workers) cannot always be fulfilled by otherparties (employers), so that this will cause problems in work relationships such astermination of employment (layoffs) ) the formulation of the problem in this study are: 1.What factors cause the termination of employment (FLE) to permanent employees. 2.What is the legal effect if there is a termination of employment (FLE) against permanentemployees according to Law Number 13 of 2003. This study uses a type of normativeresearch, namely research by examining library material or secondary data. Factors thatcaused employers to lay off workers / laborers according to Law No. 13 of 2003 are: a)violations of work agreements, company regulations, and collective labor agreements. b) Violations or serious mistakes. c) Employees are detained by the authorities. d) Due tochanges in company status. e) because the company is closed. e) Because workers arecaught in a criminal case. f) Because the company is closed. g) bankrupt company. h)Workers are absent from their jobs. The legal consequences of termination of employmentwith workers / laborers according to Law No.13 / 2003 in Article 156 paragraph (1) areto give obligations to employers to provide; a) Severance pay, b. Working period awardmoney (service fees). C. Reimbursement of rights. D. Separate money.

DEVELOPING A MODEL TO PREDICT CORPORATE BANKRUPTCY USING DECISION TREE IN THE REPUBLIC OF SERBIA

Decision trees made by visualizing the decision-making process solve a problem that requires more successive decisions to be made. They are also used for classification and to solve problems usually addressed by regression analysis. One of the problems of classification that arises is the proper classification of bankrupt companies and non-bankruptcy companies, which is then used to predict the likelihood of bankruptcy. The paper uses a random forests decision tree to predict bankruptcy of companies in the Republic of Serbia. The research results show the high predictive power of the model with as much as 98% average prediction accuracy, and it is recommended for auditors, investors, financial institutions and other stakeholders to predict bankruptcy of companies in Republic of Serbia.

Abnormal disclosure tone and going concern modified audit reports

The evaluation of going-concern uncertainties and the issuance of going-concern modified audit opinions (GCOs) continue to be of significant interest to the public and the accounting profession. We examine the association between the abnormal tone of disclosures in 10-K filings and GCOs using data from the years 2000 to 2014. We find that abnormal positive disclosure tone is associated with a higher likelihood of a GCO. We also find that the abnormal tone of disclosures is associated with lower type II and type I errors for GCOs (i.e., bankrupt companies without a prior GCO and GCOs without subsequent failure, respectively).

PREDIKSI KEBANGKRUTAN PT ASURANSI JIWASRAYA DAN PT PRUDENTIAL LIFE INSURANCE : APLIKASI METODE ALTMAN Z-SCORE

Insurance companies are non-bank financial institutions engaged in services to overcome the risks that will occur in the future so that it is expected not to go bankrupt. The purpose of this study was to compare the potential bankruptcy of PT Asuransi Jiwasraya and PT Prudential Life Insurance for the period 2010 to 2017 using the Altman Z-Score method. Bankruptcy itself is a condition in which a company does not have sufficient funds to run its business again. The initial symptoms of bankruptcy are financial distress, which is characterized by uncertainty about the company's profitability in the future. Based on the research results of PT Asuransi Jiwasraya in 2010, 2011, 2012, 2015 and 2016 are in the gray zone or have the potential to go bankrupt. In 2013, 2014 and 2017 were in danger zones or bankrupt companies. While the results of research at PT Prudential Life Insurance show during the period 2010-2017 included in the gray zone or the potential for bankruptcy.

Deep Recurrent Convolutional Neural Network for Bankruptcy Prediction: A Case of the Restaurant Industry

Using logistic regression technique and Deep Recurrent Convolutional Neural Network, this study seeks to improve the capacity of existing bankruptcy prediction models for the restaurant industry. In addition, we have verified, in the review of existing literature, the gap in the research of restaurant bankruptcy models with sufficient time in advance and that only companies in the restaurant sector in the same country are considered. Our goal is to build a restaurant bankruptcy prediction model that provides high accuracy, using information distant from the bankruptcy situation. We had a sample of Spanish restaurants corresponding to the 2008–2017 period, composed of 460 solvent and bankrupt companies, for which a total of 28 variables were analyzed, including some of a non-financial nature, such as age of restaurant, quality, and belonging to a chain. The results indicate that the best bankruptcy predictors are financial variables related to profitability and indebtedness and that Deep Recurrent Convolutional Neural Network exceeds logistic regression in predictive capacity.

Digital Property Revisited

In Chapter 5 of my book “Collisions in the Digital Paradigm: Law and Rulemaking in the Internet Age” I discussed what I called the property problem and whether a digital file could amount to property. My main argument against such a proposition was based upon technological realities – digital material was paradigmatically different from earlier items or forms that could amount to property. It was a difficult position to sustain, especially in light of the decision of the New Zealand Supreme Court in Dixon v R. I considered that the property problem was a true collision in the digital paradigm – a collision between accepted theory which had incrementally developed over the years and which had developed defining characteristics for items of property, and the technological realities of digital data. Furthermore, the particular collision in the digital paradigm is that, with so much information being digitised – and important information at that – it may well be that current remedies for breach of confidence, copyright infringement and the like do not provide a sufficient remedy nor deterrent particularly when the behaviour is accompanied by clear instances of dishonesty associated with the appropriation of information which can be converted into something of value. The difficulty is, as was observed in the case of Your Response Limited v Data Team Business Media Limited that the law of unintended consequences may come into play. My view at the time was that the confluence of data on the one hand with information on the other placed the law in an invidious position. Data or electromagnetic impulses scattered across a medium could not be property although the “merger theory” utilised by US Courts seemed to provide a possible solution. I concluded Chapter 5 with the following observation, “The issue of virtual property remains an open question and much depends upon the nature of the terms and conditions that exist between the provider and the customer. It may be that legislation will address this problem in the future, recognising that in a paradigm of continuing disruptive change, changes to perceptions of whether what may fall within the category of intangibles may have value needs to be recognised along with a further recognition that existing remedies under “traditional” fields of law such as intellectual property and breach of confidence may be too limited to accord sufficient protection. The concept of no property in pure information could remain. Information that is not associated with a medium could remain as intangible. But the digital file associated with a medium would have a level of tangibility sufficient to attract the protection of the civil and criminal law.” The cases discussed in this paper seem to provide the pathway that I tentatively identified. Hence the title “Digital Property Revisited”. In the paper I discuss two cases – one, a case about whether or not there can be property in the contents of files on a computer and hard drive including emails. The second case involves a consideration of cryptocurrencies and whether these can be property within the context of a company insolvency. The two cases are interrelated in that they deal with different aspects of digital material and which is presented in a different way. An analytical pathway to determine whether these and other types of digital data may be property is proposed.

FINANCIAL SITUATION OF PRE-PACKED INSOLVENCIES

This paper is focused on the financial situation of companies entering insolvency proceedings. It does not work with all kinds of the insolvent companies, but this paper concentrates on one specific issue. The issue is pre-pack insolvencies. The main aim is to show if the financial situation is an important factor for consent to pre-pack. The pre-pack insolvencies are insolvency cases which start with an insolvency proposal which is accompanied by a reorganization plan already approved by creditors. Prepacks should help make the insolvency process quicker and enable enterprise financial rehabilitation and sustain the going concern principle. On the other hand, the procedure can hardly be successful when the financial situation of the company is extremely poor. Therefore this paper evaluates the financial situation of the companies with pre-packed insolvency in the Czech Republic. The analysis of companies was conducted over one, two or three year periods prior to the companies entering an insolvency proceeding. According to the literature, financial indicators used for evaluation are commonly EBITDA, cash liquidity, debt ratio, ROA and the Altman Z-Score prediction model. Results for the individual enterprises are summed up in this paper using basic descriptive and variable statistics. Conclusions have especially practical implications because they show financial inability of majority pre-packed cases.

Insolvency within your trust: bankrupt settlors, insolvent companies and insolvent trusts

Abstract Anecdotally at least, there seems to be a trend towards increased litigation involving insolvency practitioners pitted against trustees. This article considers the so-called ‘insolvent trust’ and the challenges these present to their trustees, with particular reference to the Z Trust litigation. It goes on to discuss certain claims that may be faced by insolvent settlors and companies involving the adjustment of antecedent transactions for the benefit of creditors, and how trustees can protect themselves in the face of such claims.