Financial distress and corporate restructuring: a case study

• Published in: Cuadernos de gestión Vol. 23; no. 2; pp. 81 - 91
• Main Authors: Palacín-Sánchez, María-José, Alencar-García, Artur, Canto-Cuevas, Francisco-Javier
• Format: Journal Article
• Language: English
• Published: Bilbao Universidad del Pais Vasco Instituto de Economía Aplicada a la Empresa de la UPV/EHU 01.01.2023; Universidad del País Vasco (UPV/EHU)
• Subjects: Bankruptcy; Case studies; case study; Cash flow; Chief executive officers; corporate restructuring; corporate turnaround; Debt restructuring; financial distress; Insolvency; recovery strategies; spanish context; Turnaround management; Spain
• ISSN: 1131-6837; 1988-2157
• DOI: 10.5295/cdg.221759fc

This article analyses the turnaround strategies that can help a company to recover from a situation of financial distress. This study presents an innovative dynamic approach that follows the financial distress lifecycle from its beginning to its resolution while focusing on the Spanish context, which differs from the Anglo-Saxon context traditionally considered in previous studies. The methodology of the case study is employed in order to explore, on an in-depth basis, the features of the resolution of financial distress situations. To this end, the single case of a large Spanish listed company is examined over the period of 2008 to 2017. Our case study shows that the company undertook a wide range of restructuring strategies at a private level that are usually applied by distressed firms. However, for a long time, the company largely focused on debt restructuring. This lengthening of the restructuring process coupled with a weak recovery suggests a system for solving the situations of corporate financial distress that is not agile and that may also be relatively inefficient. The findings provide valuable support for practitioners in developing a successful restructuring response, and for policymakers in designing appropriate legislation on insolvency.