Corporate Bankruptcy Research Articles

Today’s Finance Markets in Conditions of Poly-Crisis and Crisis of Cost of Living

The article provides characteristics, statistics and factual material on countries connected with the current global economic crisis of the cost of living. The notion of the current poly-crisis was defined as a sum total of old and new risks in their close interaction and their adverse impact on global and national economy and finance markets. The focus was made on tightening of monetary and credit policy of national central banks in 2022–2023 in view of combating inflation, which resulted in more expensive credits, higher profitability of state treasury bonds, bankruptcy of corporations and declining standard of living of people. On the background of the global poly-crisis the author assessed macro-prudential policy of the Bank of Russia and standing of its banking system, including market of preferential mortgage with state support. Within the frames of crisis-management risks of Russian insurance and re-insurance industries were shown, as well as non-credit life insurance as a today’s driver of insurance market growth. In view of import-substitution policy an important innovation of the Moscow exchange – the informational-analytical, financial and trade terminal ‘Trade Radar’ was put forward. The author showed economic essence, trends and tools of de-dollarization policy of Russia and friendly countries, including BRICS project aiming at development of common supranational payment unit.

The impact of ESG responsibility performance on corporate resilience

Against the backdrop of an increasingly complex and uncertain external corporate environment, how to quickly adjust and recover from external risk shocks and challenges by improving corporate environmental, social, and governance (ESG) responsibility performance has become key to achieving sustainable growth for companies today. Although emerging concepts, such as ESG and corporate resilience have received widespread societal attention, exactly how ESG responsibility performance can enhance development resilience has yet to be sufficiently explained. To this end, this paper explores the mechanisms and characteristics of corporate ESG responsibility performance on corporate resilience, using a sample of 4527 A-share listed companies selected for the ESG rating by China Securities from 2009 to 2021. The study finds that: Firstly, the better the ESG responsibility performance, the more resilient the companies; each unit increase in ESG rating increases the economic value added (EVA) rate of total assets by 0.63% and reduces the risk of corporate bankruptcy by 0.32%, thus increasing corporate resilience. In addition, all three ESG sub-indicators contribute to the improvement of corporate resilience, with corporate governance rating having a more significant impact on corporate resilience. Secondly, the mechanism analysis shows that the level of the investor interaction, intensity of strategy investment, and quality of the government–business relationship play a moderating role in the process of ESG responsibility performance affecting corporate resilience. Thirdly, certain heterogeneous characteristics of ESG responsibility performance affect corporate resilience. Fourthly, there is a lag in the impact of ESG responsibility performance on corporate resilience, with the impact largely disappearing after a four-period lag.

Teams and Bankruptcy

Abstract We study how the human capital embedded in teams is affected by, and reallocated through, corporate bankruptcies. After a bankruptcy, U.S. inventors produce fewer and less impactful patents. Moreover, teams become less stable. Consequently, compared to inventors that rely less on teamwork, the performance of team inventors deteriorates more. These findings point to the loss of team-specific human capital as a cost of resource reallocation through bankruptcy. Acquisitions by industrial firms and joint mobility of inventors with past collaborations limit these losses, suggesting that the labor market and the market for corporate control help preserve team-specific human capital in bankruptcies.

Effectiveness of Law Enforcement on Corporate Bankruptcy Status

<p>This study aims to evaluate the effectiveness of law enforcement on the status of bankruptcy in Indonesia. Lawrence M. Friedman's legal system theory is used because it has a comprehensive scope to evaluate the effectiveness of enforcing legislation. This study uses juridical-normative research with statutory and case approach. The laws and regulations studied are Law no. 37 of 2004 concerning Bankruptcy and Postponement of Debt Payment Obligations (KPKPU), while the case study takes the case of the bankruptcy of Telkomsel in 2012. This study finds that bankruptcy law enforcement in Indonesia has not been effective. This is because Indonesian bankruptcy law still has weaknesses in terms of substance, structure, and legal culture. In addition, this study finds that the fundamental weakness of Law no. 37 of 2004 is the application of simple proof as a mechanism for imposing bankruptcy statements to debtors. The application of this simple evidence makes law enforcers (judges) tend to ignore facts other than the two conditions stipulated in Law no. 37 of 2004 to impose bankruptcy status, namely the existence of two or more creditors and the existence of one debt that is due and collectible. In the end, the simple evidence mechanism does not open up opportunities for law enforcement officials to assess the debtor's ability to pay off their debts.</p>

Predicting Corporate Bankruptcy: A Comparative Analysis of Machine Learning Models

Predicting Corporate Bankruptcy: A Comparative Analysis of Machine Learning Models

The dynamics of informed trading around corporate bankruptcies

We investigate the dynamics of informed trading both before and after corporate bankruptcy announcements using high frequency data. Our findings reveal that pre-announcement informed selling attenuates subsequent announcement returns, with this effect being weaker for firms receiving extensive pre-announcement media coverage or adverse news sentiment. We also find that post-announcement informed trading can serve as a predictor of subsequent bankruptcy outcomes. Overall, results are consistent with there being material information leakage, warranting policy efforts to better safeguard less informed investors.

Limit to Arbitrage and Distress Risk Puzzle in Vietnam: Does Corporate Bankruptcy Regulation Matter?

This study is the first to examine how limit-to-arbitrage factors impact the distress risk puzzle in Vietnam before and after implementing bankruptcy regulations. Our research utilizes asset pricing models, portfolio sorting methodologies, and the Fama and French four-factor model to analyze an unbalanced panel with 35,255 firm-month observations from non-financial firms in the Vietnam stock market from 2008 to 2021. We find a persistent negative correlation between distress risk and corporate profitability, even after accounting for limit-to-arbitrage factors. Notably, this trend is more pronounced among larger firms. Intriguingly, the distress risk puzzle disappears after the introduction of bankruptcy regulations. Additionally, we observe that limit-to-arbitrage factors suppress stock returns due to mispricing issues, supporting liquidity risk theory. Our study provides valuable insights into the distress risk puzzle, especially in emerging markets. JEL Classification: G11, G12, G14.

The relevance of cash flow information in predicting corporate bankruptcy in Italian private companies

This study investigates the relevance of cash flow information in predicting corpo-rate bankruptcy in Italian private companies. The results indicate that while the cash flow-based model exhibits a high predictive capacity, it is less effective than the accrual-based model. In addition, cash flow-based ratios do not improve the predictive capacity of the accrual-based model. From a theoretical perspective, this study enriches existing literature on the relevance of cash flow information in predicting corporate bankruptcy by extending the investigation to the Italian con-text, which has not yet been sufficiently studied. From a practical standpoint, it provides Italian companies with new bankruptcy prediction models and offers pre-liminary suggestions regarding the relevance that should be attributed to cash flow information within the organizational, administrative, and accounting structures that they must establish to promptly detect crises and undertake appropriate initia-tives in a timely manner to comply with the requirements of the new legislation on business crises.

Comparative Analysis Of The Influence Of Capital Structure, Company Size, And Governance On Company Bankruptcy With Profit Quality As A Moderating Variable In The Period Before The Pandemic And During The Covid-19 Pandemic

This study uses earnings quality as a moderating variable to determine a comparative analysis of the effect of capital structure, firm size, and management on corporate bankruptcy. This quantitative study uses secondary data obtained and accessible through the website of the Indonesia Stock Exchange. The sample for this study consisted of 53 refined manufacturing companies. This study uses the purposive sampling method to select the desired sample. The analysis method of this study uses linear regression analysis and moderated regression analysis as analysis tools in Eviews 12. The results show that (1) Capital structure affects the company's bankruptcy in the phase 2015-2018, but not in the phase 2019-2022. (2) The size of the company does not affect the bankruptcy of the company in the phase 2015-2018, but it has an effect in the period 2019-2022 (3) The management, in this case, the ownership of the management, has an effect on the bankruptcy of the company also in 2015. -in phase 2018 and phase 2019-2022 (4) Institutional ownership affects the bankruptcy of the company and in the phases 2015-2018 and 2019-2022 (5) The quality of results does not affect the bankruptcy of the company in the 2015-2018 phase, but it has an effect in the 2019-2022 phase. (6) Earnings quality can slow company size to corporate bankruptcy in both phases, 2015-2018 and 2019-2022. (7) In the phase 2019-2022, the quality of the result can slow down the ownership.

Persistence of collective memory of corporate bankruptcy events discussed on X (Twitter) is influenced by pre-bankruptcy public attention

Collective attention and memory involving significant events can be quantitatively studied via social media data. Previous studies analyzed user attention to discrete events that do not change post-event, and assume universal public attention patterns. However, dynamic events with ongoing updates are common, yielding varied individual attention patterns. We explore memory of U.S. companies filing Chapter 11 bankruptcy and being mentioned on X (formerly Twitter). Unlike discrete events, Chapter 11 entails ongoing financial changes as the company typically remains operational, influencing post-event attention dynamics. We collected 248,936 X mentions for 74 companies before and after each bankruptcy. Attention surged after bankruptcy, with distinct Low and High persistence levels compared with pre-bankruptcy attention. The two tweeting patterns were modeled using biexponential models, successfully predicting (F1-score: 0.81) post-bankruptcy attention persistence. Studying bankruptcy events on social media reveals diverse attention patterns, demonstrates how pre-bankruptcy attention affects post-bankruptcy recollection, and provides insights into memory of dynamic events.

Law enforcement and auditors' roles, responses, and complicated relationships in accounting fraud?

Financial statement falsification or fraud that directly affects financial statements. The most extreme financial statement manipulation is accounting fraud. Beyond financial losses, fraud affects employees, industry, the environment, and society (International Public Sector Fraud Forum, 2020). Fraud causes corporate bankruptcy, reducing family income. Fraud distorts markets by giving fraudulent companies an advantage over legal ones. Accounting fraud can cause controversies that impact society and stakeholders. Regulators, practitioners, and researchers prioritize preventing these potentially dangerous events. Corporate activity monitoring has improved, but severe accounting fraud remains in ostensibly robust and diverse institutional environments. Accounting literature on auditor-law enforcement fraud coordination is examined in this study. This literature review uses a mixed methods research synthesis to analyze accounting journal articles from 2014 to 2024 using keywords like "Auditors," "Enforcement," "Accounting fraud," "responses," and "complicated relationships." Auditor and law enforcement roles, leading fraud indicators, and stages will be studied. Use Publish or Perish (PoP) and SLR 7P to collect data from SINTA, SEMANTIC Scholar, and Google Scholar. The investigations show the range of fraud terminologies and concepts, quantitative measurement discrepancy, and shallow fraud analysis. This study suggests more law enforcement-auditor case studies. This work will inform fraud accounting research. This paper underlines the need for academic, political, and practitioner cooperation to limit fraud's economic and social harms in a complex and interrelated system. This study examines how the accounting literature addresses law enforcement-auditor relationships in accounting fraud rather than monitoring systems or broad fraud discussions. Law enforcement actions have a significant impact on auditor-client relationships and information disclosure. Customers' perceptions of auditor quality and risks will be examined in the essay.

Research on the Identification of Value in Corporate Bankruptcy Reorganization

Bankruptcy reorganization, as a crucial procedure for corporate regeneration and debt resolution, plays a significant role in the salvation of enterprises and the resolution of debts. The identification of the value in corporate bankruptcy reorganization is an extremely important prerequisite, as it is closely related to the initiation of the reorganization process, the smooth progress of the reorganization, and the ultimate success of the reorganization. From the current judicial perspective, Chinas Enterprise Bankruptcy Law does not provide explicit regulations on the identification of the value in corporate bankruptcy reorganization. This lack of clarity hampers the ability of various levels of peoples courts and bankruptcy administrators to address relevant issues in practice, thereby impeding the effective protection of the interests of corporate debtors and creditors. Therefore, improving the identification of the value in corporate bankruptcy reorganization holds significant practical and guiding significance.

Bankruptcy in the UK: Do Managers Talk the Talk Before Walking the Walk?

AbstractThis study examines whether managers employ annual report textual disclosures as a conduit to communicate the probability of future corporate bankruptcy or to intentionally mislead stakeholders owing to impression management incentives. We conduct various examinations around the information content of the tone conveyed by textual disclosures in unstructured UK annual reports and the probability of corporate bankruptcy. We document that firms that communicate a more net positive tone are associated with lower bankruptcy risk. Importantly, this association is found to be stronger for firms whose managers have a lower incentive to mislead investors owing to better board monitoring, stringent stock market regulation, and Big 4 audits. We also offer complementary evidence that firms conveying a more net positive tone exhibit higher future performance and earnings persistence, and lower future performance volatility. These firms are also less likely to exhibit extreme corporate policies and to receive a qualified auditor's opinion. Overall, this study sheds light on whether managers tend to inform or misinform (bury their heads in the sand) about corporate bankruptcy.

Corporate in Financial Distress and Determinant Analysis of Successful Financial Turnaround

Corporate financial distresses and turnarounds has always been relevant on business literatures because we have seen more than enough corporate bankruptcies over the past decades. Financial distress is a condition of declining financial performance, earlier phase prior to companies experiencing bankruptcy or liquidation. The response to this condition ranges from a denial of the problem, to reducing the scale and scope of operations, all the way to the top change of management and dissolution of corporation. With the complexities of issues and implications associated with financial distresses and the recoveries attempted by corporations, the ability to formulate appropriate strategic responses is becoming very much important for management, researchers and practitioners. This research is focusing on the determinant analysis of multiple organizational factors which are expense retrenchment, profitability, free assets, size, assets retrenchment and leverage on successful turnaround of manufacturing companies listed in Indonesia Stock Exchange (IDX) in research period 2015 to 2019. Data used in this research are secondary ones which obtained from Indonesian Capital Market Directory (ICMD). Financial data from 2015 to 2019 are used to determine financial distresses utilizing Altman’s Z-Score model, and data from 2016 to 2018 are processed as the independent variables. This research takes 125 sample of manufacturing companies which after screening come down to 36 companies in Non-Turnaround (NT) group and 8 companies in Turnaround (T) group. The analysis models used in this study include firm-specific variables from 2016 to 2018 to test the hypotheses. At the 5% level of significance, the logistic regression test showed that the research variables of profitability, free assets and leverage considerably affected the likelihood of a successful financial turnaround, and the prediction accuracy was 87%.

FINANCIAL RESTRUCTURING IN CONDITIONS OF WARTIAL LAW

The article focuses on the analysis of financial restructuring in times of war, specifically its significance, strategies, and challenges arising in the context of armed conflict. Key aspects such as reduced economic activity, financial pressure, and the threat of corporate bankruptcy in wartime conditions are examined. The article also identifies unresolved issues like socio-economic inequality and banking system instability. It highlights the importance of financial restructuring as a tool to overcome economic difficulties and ensure stability during a crisis conflict. The purpose of the article is to identify financial restructuring strategies in times of war, illuminate key challenges and unresolved issues in this context, and indicate possible ways to improve the effectiveness of financial reforms to ensure the stability of the economy and financial system during wartime. The relevance of researching financial restructuring in times of war for Ukraine is extremely high, given the country's complex geopolitical conditions and the challenges it faces. War, aggressive actions by neighboring states, and global instability make Ukraine's financial sector vulnerable to external shocks and economic turbulence. The significance of this topic is underscored by the necessity to develop and implement strategies aimed at ensuring the stability of the financial system, supporting economic development, and ensuring social well-being in the context of wartime conflict. Further research in this direction is a crucial step in understanding the impact of wartime on financial markets and in developing innovative strategies that will enable Ukraine to effectively adapt to challenges and maintain economic resilience in these unpredictable conditions. The analysis reveals prospects for improving financial restructuring through the adoption of innovative technologies and enhancement of regulatory mechanisms. The research provides practical recommendations for leadership and financial institutions to more effectively address financial challenges during wartime. In conclusion, the article emphasizes the importance of further research in this area and suggests possible paths for developing strategies aimed at stabilizing the financial system and ensuring economic resilience in unpredictable wartime conditions.

Corporate Bankruptcy Prediction Models: A Comparative Study for the Construction Sector in Greece

This study focuses on testing the efficiency of alternative bankruptcy prediction models (Altman, Ohlson, Zmijewski) and on assessing the possible reasons that led to the confirmation or not of the prevailing model. Data from financial statements of listed (Greek) construction companies before the economic crisis were utilized. The results showed that Altman’s main predictive model as well as the revised models have low overall predictability for all three years before bankruptcy.

The unexpected consequences of company bankruptcy: An investigation into the spillover effect of local economic liquidation

Understanding the impact of corporate failures is crucial, as they not only directly harm the companies involved but also have far-reaching consequences on local economies, leading to increased unemployment, crime rates, and societal problems. The objective of this study is to examine the unanticipated consequences of corporate bankruptcy on regional economies, with a specific emphasis on the ripple effects that go beyond the immediate parties involved. We employed a difference-in-differences model to investigate the effects of corporate liquidation events on 2985 enterprises situated in 276 cities throughout China, using data spanning from 2002 to 2021. The results of our study indicate that towns hosting bankrupt enterprises witnessed a significant decline in their total economic productivity, a rise in unemployment rates, and an increasing dependence on social welfare programs. The impact of these spillover effects was especially noticeable in cities where the insolvent companies had substantial market shares. The findings indicate that company bankruptcies have wide-ranging consequences, requiring comprehensive measures and proactive policies to minimize the effects of future economic disruptions.

Bankruptcy Resolution: Misery or Strategy

Contrary to conventional wisdom, this study reports a positive relationship between large US firms' leverage levels and their likelihood of emerging from Chapter 11 bankruptcy. In anticipation of a favourable court outcome, which allows them to emerge from bankruptcy with reduced debt, firms tend to increase their leverage levels in the years preceding the bankruptcy filing year. This suggests strategic abuse of bankruptcy courts and creditors. Test results suggest that firms start acting strategically up to four years before filing for bankruptcy so that they can emerge with a reduced debt burden at the cost of creditors. Additionally, our study also contributes to the corporate bankruptcy literature by exploring a set of factors (related to the firm, judicial, case, geographic, and macroeconomic characteristics) explaining the likelihood of firms emerging from bankruptcy, and proposing a parsimonious multivariate model that best predicts the likelihood of surviving Chapter 11 bankruptcy.

Financial distress predictions with Altman, Springate, Zmijewski, Taffler and Grover models

Several models have been developed to predict financial difficulties and corporate bankruptcy. In this research various models were employed, including the Altman model (referred to as the Z-Score), the Springate model (known as the S-Score), the Zmijewski model (designated as the X-Score), and the Grover model (referred to as the G-Score). These techniques serve the purpose of evaluating the likelihood of encountering financial difficulties, which in turn determines the probability of PT Garuda Indonesia (Persero) Tbk going bankrupt. The study utilized secondary data sourced from financial statements spanning the years from 2020 to 2022. The application of the Altman model for bankruptcy prediction revealed that PT Garuda Indonesia (Persero), Tbk experienced financial distress throughout the period from 2020 to 2022. According to the Springate model, the company was in a state of distress and declared bankruptcy in 2020 and 2022, while 2021 fell into a grey area. The Zmijewski model indicated that the company was on the brink of bankruptcy, with financial difficulties and a potential risk of bankruptcy within the next three years. Grover's model predicted bankruptcy for the company in 2020 and 2022, but indicated safety in 2021. Notably, the Taffler model emerged as the most accurate in forecasting bankruptcy, boasting a 100% accuracy rate with no errors. Meanwhile, the Zmijewski model achieved an 81.25% accuracy rate with an error rate of 18.75%, and the Springate model exhibited the lowest accuracy in bankruptcy prediction, scoring only 12.50% accuracy with an error rate of 87.50%.

Study on the Conflict of Tax Laws in Corporate Bankruptcy

Study on the Conflict of Tax Laws in Corporate Bankruptcy