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Turnaround strategies in financially distressed times - an empirical investigation of European entities in distress

Beute, N.W. (2018) Turnaround strategies in financially distressed times - an empirical investigation of European entities in distress.

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Abstract:This study investigates the effect of turnaround strategies on the improvement in Altman’s Z”-score. Operational restructuring, asset restructuring and financial restructuring are found to be important clusters when conducting a research like this and underlying variables have been identified by conducting a literature review. In order to find this effect, several samples have been constructed. First, two samples with the main variables of interest are created, in which one sample incorporates all cases and the second only incorporates cases that experienced a change where the entity went from a distressed score to a non-distressed score, whereas the other two samples employ robust variables. Finally, a sample with restructuring thresholds is incorporated in the study. Firms in the sample are situated in the EU and realise at least €20 million turnover. This study finds that especially operational components of an entity entail a significant effect on improving the Z”-score. A reduction in both operational expenses and in the operational component of the working capital entail highly positive and significant results in achieving these improvements. This could have been expected as this is closely related to the true business of the firm, and what remains as the net income an entity achieves. Some robust regressions have also been run to find out what effects the broad balance sheet accounts have on the improvement in Z”-score. This also returns results that operational restructuring positively affects these improvements.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/74546
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