Paper: arXiv 2402.18135

Authors: Rachid Achbah

Abstract

This study aims to empirically investigate the impact of managers’ characteristics on their choice between in-court and out-of-court restructuring. Based on the theory of upper echelons, we tested the preferences of 342 managers of financially distressed French firms regarding restructuring decisions. The overall findings of this study provide empirical support for the upper echelons theory. Specifically, managers with a long tenure and those with a high level of education are less likely to restructure before the court and are more likely to restructure privately. The findings also indicate that managers’ age and gender do not significantly affect their choice between in-court and out-of-court restructuring. This study contributes to the literature on bankruptcy and corporate restructuring by turning the focus from firm characteristics to manager characteristics to explain restructuring decisions.

Complexity vs Empirical Score

  • Math Complexity: 2.5/10
  • Empirical Rigor: 6.5/10
  • Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper applies established behavioral frameworks (Upper Echelons Theory) to corporate restructuring, using empirical data from 342 distressed French firms. While the mathematical complexity is low (primarily empirical/logistic regression style analysis), the study provides strong empirical insights into executive traits versus firm characteristics in bankruptcy decisions.

Research Flowchart

  flowchart TD
    A[Research Goal: Impact of Manager Characteristics on SME Restructuring Choice] --> B[Theoretical Framework: Upper Echelons Theory]
    B --> C[Data Collection: 342 Managers of Distressed French SMEs]
    C --> D[Empirical Analysis: In-Court vs. Out-of-Court Decisions]
    D --> E1[Finding: High Tenure & Education -> Prefer Out-of-Court]
    D --> E2[Finding: Age & Gender -> No Significant Effect]