Financial distress and corporate turnaround: A review of the literature and agenda for research
Griffith Business School, Griffith University
Faculty of Business and Law
School of Accounting, Finance and Economics
A considerable body of research aims to discriminate between companies with the potential to stem decline, or recover from financially distressed conditions, from those which will ultimately fail. The literature spans a number of academic disciplines and embraces theorising, case studies and anecdote. Even so much confusion remains regarding the circumstances where recovery is feasible, and those factors and strategies likely to facilitate such recovery. This paper reviews this literature by focusing on the turnaround decision, the process and problems of reorganization and the probability of its success. Categorization of studies centres on the turnaround process to facilitate the generation of an analytical overview of findings with regard to alternative strategies which are a precondition for success. The paper concludes with a future research agenda embracing an alignment of strategy, implementation, and the sources of financial distress, together with an extended scope for turnaround studies.