Date of Award

1998

Document Type

Thesis

Publisher

Edith Cowan University

Degree Name

Doctor of Philosophy

School

School of Business

Faculty

Faculty of Business and Public Management

First Supervisor

Associate Professor Alan Brown

Abstract

The primary objective of this research was to identify the determinants of corporate turnaround feasibility and their effect (in terms of their state of existence and their existence) on the probability of corporate turnaround feasibility in Successful and Non Successful Turnaround Companies. The other objective was the development of an empirical model of the determinants of corporate turnaround feasibility capable of predicting the feasibility of corporate turnarounds. One hundred 'troubled companies ' were identified out of two hundred and eleven publicly listed companies of the Kuala Lumpur Stock Exchange through observations of their share price performance, earnings before interest and tax, earnings after interest and tax and by the Malaysian Z- Score (PNB Score) failure detection model test. They were further demarcated into 57 Successful Turnaround Companies (STC) and 43 Non Successful Turnaround Companies (NSTC). These two groups were then compared on the determinants of turnaround feasibility. The study confirms that the feasibility of corporate turnaround of an organisation is dependent on the existence (exists or non existant) and the state of existence (whether favourable or non favourable) of a set of variables or determinants of corporate turnaround feasibility i.e. Causes of Decline, Severity of Crisis, Company's Historical Strategy, Industry Characteristics, Company's Cost Price Structure, Commitment of Shareholders, Commitment of Bankers, Commitment of Creditors, Commitment of Employees, New Competent Management, Viable Core Business, Bridge Capital and Realistic Turnaround Plan. In identifying the existence and the state of existence of the key determinants of corporate turnaround feasibility in the STC and the NSTC, it was found that the STC had higher occurrences of favourable states of existence for the key determinants than the NSTC. STC's were also found to experience higher occurrences of existence (exists) in the key determinants compared to the NSTC. A 'Corporate Turnaround Feasibility Intensity Model' was developed to test corporate turnaround feasibility intensity level. Subsequently, the empirical model or the multivariate logistic regression model was then applied to finalise and reaffirm the feasibility of the corporate turnaround of the organisation. The qualitative and empirical models complement each other in their application, or used on their own can test the feasibility of corporate turnaround. The availability of both qualitative and empirical models above to test and to predict the feasibility of corporate turnaround from this research can help solve one of the biggest dilemmas facing numerous shareholders, top management, management consultants and bankers, namely, deciding whether to go ahead with the turnaround process or not. The models can help save costly errors in terms of money, labour cost, psychological turmoil, time and wasteful resources due to wrong decision making. They also constitute a new contribution to knowledge.

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