Insolvency administration as a strategic response to financial distress

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Journal Article

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Routledge, J., & Morrison, D. (2012). Insolvency administration as a strategic response to financial distress. Australian Journal of Management, 37(3), 441-459

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2012 HERDC submission. FoR code: 150103

© Copyright The Authors, 2012




This study considers whether the strategic decision to enter voluntary administration (VA) rather than to trade the company’s business for a protracted period of declining performance is systematically related to the effective monitoring of management decision-making. Analysis that tests the association between strategic entry into VA and the likelihood that a company will reorganize in VA is also presented. We find about half of the companies in our sample entered VA as a strategic choice. The likelihood of strategic entry to VA increased with the proportion of independent board directors, the existence of an audit committee and a dual CEO/chair board structure. Subsequent analysis of reorganization outcomes suggests that strategic entry into VA improves prospects for a successful reorganization.

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