Financial distress, corporate restructuring and firm survival

Research on corporate distress and bankruptcy and the accompanying e? orts of ? rms to restructure their operations and balance sheets have become an increasingly important ? eld in ? nancial economics and business administration. Especially in Germany where the recent period of economic downturn and large-scale bankruptcy ? lings coincided with extensivereformsofthebankruptcylegislationthetopichasenjoyedcontroversialdebates among economists, legal scholars and public policy makers. Yet so far insights from empirical research that can provide valuable guidance in these debateshaveremainedsparseandinconclusive. Onereasonforthelackofevidenceisthat common ? nancial theory on corporate restructuring is not fully compatible with the G- man institutional background and thus often allows only ambiguous predictions. Mo- over, empiricalinvestigationsofGermanrestructuringshavesofarbeenalmostimpossible due to the lack of exhaustive data. This holds in particular for private reorganizations, which present the predominant form of restructuring distressed ? rms in Germany. Many economically highly interesting aspects pertain to this ? nal stage in the corporate li- cycle. Forexample, thequestionwhetherthe? rm’smanagement, shareholdersorcreditors should trigger a formal bankruptcy proceeding or, alternatively, pursue a going-concern in an out-of-court workout has a myriad of economic implications.