Corporate Response to Distress: Evidence from the Asian Financial Crisis

Abstract

This paper provides a comprehensive examination of the ways in which companies respond to financial distress by restructuring their assets (through asset sales, mergers or liquidations) or liabilities during an economy-wide crisis. We contrast financial and corporate governance considerations and find strong support for the notion that, during a crisis, both financial constraints and corporate governance have a large impact on the restructuring choice.

Keywords: bankruptcy, liquidation, restructuring, corporate governance

JEL Classification: G33, G34