The Effect of Restructuring on Financial Recovery with Emphasis on Corporate life cycle at TSE

Document Type : Original Article

Authors

1 Assistant Prof, Department of Managemet, Shahrood University of Technology, Semnan, Iran.

2 Msc of Financial Management, University of Isfahan, Isfahan, Iran.

Abstract

Recovery of the financial structure in order to avoid financial distress in the firm's life cycle is of particular importance, which can be influenced by structuring strategies. The main objective of this research is to assess the impact of life cycle and restructuring on financial recovery in a sample of 148 firms listed in Tehran stock Exchange during 2008-2017. Therefore, by identifying managerial, operational, and financial restructuring strategies during the life-cycle, its effect on the financial recovery in the form of logistic regression models has been investigated. The research findings indicate the effect of managerial restructuring strategy in conditions of growth and decline on of financial recovery, as well as operational strategies, especially in the phase of decline, can lead to restoration of financial recovery. Financial strategies in the area of dividend have a reversal effect on the financial recovery, but changes in the capital structure based on capital and debt can lead to financial recovery. Finally, the results show that multiple restructuring strategies have positive effects on financial recovery.

Keywords


  1. A'arabi, S.M & Razmjoee, M (2011). Financial Strategies and Stock Return of Companies in Tehran Stock Exchange. Journal of Strategic Management Studies, 9(2), 141-165. (In Persian)
  2. Abedi, R. & Zeynalzadeh, H. (2016). The Coordination Model of Financial Strategy and Organizational Life Cycle with Financial Performance. Journal of Accounting Advances, 7(2), 58-96. (In Persian)
  3. Abrahamid taifeh, O. (2011). Evaluation the Effect of Business Unit's Life Cycle on Capital Structure Decisions in Companies Accepted in Tehran Stock Exchange. Master thesis, Raja Higher Education Institute. (In Persian)
  4. Adizes, I. (2014). Managing Corporate life cycle: How Organizations Grow, Age and Die and what do about it.California :Adizes Institute Publications
  5. Altman, E. (2006). Corporate Financial Distress and Bankruptcy. The Publication of John Wiley & Sons.
  6. Anderson, M-C. (2008). Strategic Transformation: A Fast Cycle Improving Organizations, Translation by Samad Aali – Dr and Shahram Mirzaei Daryani, Sabzan Publications. (in Persian)
  7. Anthony, H., & Ramesh, K. (1992). Association between accounting performance measures and stock prices: a test of the lifecycle hypothesis. Journal of Accounting and Economics, 15(1), 203-227.
  8. Atanassov, J., & Kim, H. (2009). Labor and corporate governance: international evidence from restructuring decisions. Journal of Financ, 64(4), 341–373.
  9. Azari Panah, SH. & Fallah Shams, M. (2013). Investigating the relationship between probability of default and capital structure by KMV model. financial knowledge of securities analysis, 6(1), 85-96. (In Persian)
  10. Bixia, X. (2007). Life Cycle Effect on the Value Relevance of Common Risk Factor. Journal of Accounting and Finance, 6(3), 162-175.
  11. Higgins, R. (2007). Analysis for Financial Management. NewYork: McGraw-Hill.
  12. Jabło´nski, A. & Jabło´nski, M. (2016). Research on Business Models in their Life Cycle. Journal of Sustainability, 8(4), 2-37.
  13. Karami, GH-R. Omrani, H. (2010). The Effect of Life-Cycle Stages and Accounting Conservatism on Firm Valuation. The Iranian Accounting And Auditing Review, 17(59), 79-96. (In Persian)
  14. Khansari, R. (2009). Evaluation of the application of KMV structural model in predicting credit risk of legal clients of Iranian banks. Master's thesis for financial management, Imam Sadiq University (AS). (In Persian)
  15. Khodadad, V., Vaez, S. A. & Emami, M. R. (2017). Development of the Ohlson (1995). Prediction An Valuation Models with the Consideration of Bankruptcy Risk, Journal of Asset Management and Financing, 5(1), 99-116. (In Persian).
  16. Koh, S., Durand, R., Dai, L., & Chang, M. (2015). Financial distress: Lifecycle and corporate restructuring. Journal of Corporate Finance, 12(4), 19–33.
  17. La Rocca, M., & La Rocca, T. (2011). Capital Structure Decisions during a Firm’s Life Cycle. Journal Small Business Economics, 37(1), 107-130.
  18. Lohrke, F., Bedeian, A., & Palmer, T. (2004) The Role of Top Management Teams in Formulating and Implementing Turnaround Strategies: A Review and Research Agenda. International Journalof Management Reviews, 5(6), 63–90.
  19. Manzaneque, M., Priego, A. & Merino, E. (2016). Corporate Governance Effect on Financial Distress Likelihood. Revista de., 19(1), 111-121.
  20. Park, Y., & Chen, K. (2006). The Effect of Accounting Conservatism And Life-Cycle Stages On Firm Valuation. Journal of Applied Business Research, 22, 75-92.
  21. Rahimodin, N. (2010). Life Cycle effect on pricing audit services. Empirical Studies in Financial Accounting Quarterly, 7(28), 71-95. (In Persian)
  22. Rezaei, F. Piri, A., & Nili, V. (2013). Influence of Intellectual Capital on Firm’s Market Value in Different Life-Cycle Stages. Journal of Development & Evolution Management, 5(13), 19 -28. (In Persian)
  23. Robbins, A. (2013). Management of Organizational Behavior (Thirty-Eighth Edition).Translations by Ali Parsaeiyan and Seyyed Mohammad Arabi. Tehran: Publications Office of Cultural Research. (In Persian)
  24. Robbins, D., & Pearce, J. (1992). Turnaround: retrenchment and recovery. Journal of Strategic Management, 13, 287–309.
  25. Rostami, M. R., Fallah Shams, M., & Eskandari, F. (2011). Evaluation of Financial Distress in Companies Listed in Tehran Stock Exchange: A Comparative Study between Data Envelopment Analysis and Logistic Regression. Management Research in Iran, 15, 129-147. (In Persian)
  26. Salehi, A., Elhaei, Sahar, M. & Sawari, A. (2017). Investment Dicision of Firms Under Financial Distress, Journal of Financial Manangement Perspective, 6(16), 31-50. (In Persian).
  27. Shleifer, A., & Vishny, R. (1992). Liquidation values and debt capacity: a market equilibrium approach. Journal of Finance, 47, 1343–1366.
  28. Sori, A. (2016). Econometrics with Eviews and Stata, Tehran: Farhang publishing. (In Persian).
  29. Sudarsanam, S., & Lai, J. (2001). Corporate Financial Distress and Turnaround Strategies: an Empirical Analysis. Journal of Management, 12, 183–199.
  30. Wruck, K. (1990) Financial Distress, Reorganization, and Organizational Efficiency. Journal Financ Economics, 27, 419–444.