Boundaries within boundaries : identifying the boundaries facing private firms that are in financial distress

Show simple item record Fairhurst, Keith J. Pretorius, Marius 2019-06-24T11:34:24Z 2019-06-24T11:34:24Z 2019-02-21
dc.description K.J.F. completed this research as part of a PhD thesis and M.P. was his supervisor for the PhD research thesis. ( en_ZA
dc.description.abstract BACKGROUND : Delay in cognition by management is likely to see a firm’s distress worsening and the turnaround potential of a firm eroded. This inertia and resistance to change are further likely to result in antecedents absent in the required cognition of distress to trigger turnaround actions. AIM : To explore firstly the Zone of Insolvency (ZOI), and the boundary of financial distress, secondly, agency theory, boards, directors and the ZOI and finally, how these constructs may influence cognition of distress and the firm turnaround boundary value. SETTING : The sample studied was drawn from the population of all privately owned firms that had filed for Business Rescue in South Africa between 01 May 2011 and 30 June 2016. METHODS : A quantitative research approach consistent with an objective position was utilised. The approach included descriptive statistical analysis and the measurement of strength of relationship between variables. RESULTS : We identified two boundaries that exist as triggers in respect of the required turnaround action: firstly, the boundary of the zone of insolvency (ZOI), and secondly, the turnaround boundary that occurs at some time after the onset of distress and once management has recognised and accepted the distressed position. The period between the two boundaries is a period that may see the turnaround potential of the distressed firm further eroded even beyond the point of no return, making a turnaround impossible. CONCLUSION : Quantification of the difference in value of the firm between the onset of financial distress and evidence of direct action to turn around the distressed firm may be termed ‘the cost of cognition delay’. Understanding the cost of cognition delay contributes to practice and academic interests and for firms that rely on the legal protection of formal turnaround processes, it may be argued that the act of formal filing is a signal that cognition has occurred. en_ZA
dc.description.department Business Management en_ZA
dc.description.librarian am2019 en_ZA
dc.description.uri en_ZA
dc.identifier.citation Fairhurst, K.J. & Pretorius, M., 2019, ‘Boundaries within boundaries: Identifying the boundaries facing private firms that are in financial distress’, Southern African Journal of Entrepreneurship and Small Business Management 11(1), a147. en_ZA
dc.identifier.issn 2522-7343 (print)
dc.identifier.issn 2071-3185 (online)
dc.identifier.other 10.4102/sajesbm.v11i1.147
dc.language.iso en en_ZA
dc.publisher AOSIS Open Journals en_ZA
dc.rights © 2019. The Authors. Licensee: AOSIS. This work is licensed under the Creative Commons Attribution License. en_ZA
dc.subject Resistance en_ZA
dc.subject Business rescue en_ZA
dc.subject South Africa (SA) en_ZA
dc.subject Zone of insolvency (ZOI) en_ZA
dc.subject Firm turnaround boundary value en_ZA
dc.subject Cognition of distress en_ZA
dc.subject Financial distress en_ZA
dc.subject Agency theory en_ZA
dc.subject Boards en_ZA
dc.subject Directors en_ZA
dc.title Boundaries within boundaries : identifying the boundaries facing private firms that are in financial distress en_ZA
dc.type Article en_ZA

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