corporate bankruptcy, turnaround, and liquidation: a research proposal
Financial insolvency is a devastating phenomenon for individuals, families, single proprietor businesses, partnerships, and corporations. The phenomenon can be especially crippling when it occurs within a market-based economy. In the United States, some degree of relief for those experiencing financial insolvency may be afforded in many instances through the application of bankruptcy law (El Gazzar, Finn, & Tang, 2004).
A declaration of bankruptcy, however, is only one of the options that is associated with financial insolvency if the oncoming train can be spotted ahead of time. In such scenarios, individuals, families, and businesses may be able to restructure their situations to an extent that a complete financial meltdown can be avoided. The two options involved in such a scenario are (a) finding ways to reverse existing trends and (b) liquidating one's assets and settling one's debts. A third option of just walking away and disappearing is not considered in this discussion. Thus, in addition to the option of a bankruptcy declaration to either reorder your financial situation or to have one's debts cancelled and ruin one's credit standing in the process, the prediction of bankruptcy risk may be applied to prepare for a different option (Clapham, Schwenk, & Caldwell, 2005; Lohrke, Bedeian, & Palmer, 2004; Sonnier, 2010).
The three options delineated in the preceding discussion differ depending upon the parties that are involved. Specifically corporations are treated differently than are individuals, families, and unincorporated businesses. This research proposal is concerned exclusively with the development of financial insolvency or the risk thereof by corporate entities.
When the risk of developing financial insolvency can be projected with some degree of reliability, corporations can assess the options of restructurin...