Wednesday, March 6, 2019
A Critique Paper on the Article Essay
Thither had been rampant tidings ab come out of the closet economic crises that come and go due to a mix of reasons. More often than not, these crises modify a number of countries, and not affectly, a lot of businesses as well, especially those that operated in the affected countries. The issue here now is how a businesss top management allow for respond when faced with the repercussions of a crisis. Of course, on that point are many courses of motion to choose from, and one of these options is restructuring.Corporate restructuring is entered into by pie-eyeds that deemed that no other(a) practicable options exist still this. The usual form of restructuring is debt restructuring, wherein the creditor and the debtor renegotiate the call and conditions of the existing debt of the latter in order to make it less onerous to fulfill. It may lead one to wonder why any fair creditor would agree to this knowing it would be disadvantageous on his part. One of the primary(prenomi nal) reasons why creditors agree to this arrangement is beca usance of its relationship with the debtor.If it is in good toll with the debtor or has a history of mutual benefit, creditors would then admit this option, notwithstanding the detriments on its part. Restructuring is not to a fault limited to corporate bodies. any(prenominal) types of businesses, may it be small, medium or large enterprises, may using up this option. In fact, this paper tackles the restructuring process and the probability of its success based on small- and medium- coatd enterprises, given the following variables of determination enumerated in the paper. II. Main discussion a. analysis of the article This paper aims to measure the homogeneouslihood of success of a debaucheds restructuring process with a banks assistance, given set factors. To empirically test the papers hypothesis, the exemplification is formulated as follows Success in Restructuring = f (firm size, ROA, debt ratio, debt structure , bank debt, restructuring period, value of collateral) The size of the firm, which is measured using a firms total assets, is taken into context in determining the outcome of the restructuring process. This is so because it regains the level of re denotations a firm possesses.In the same vein, the value of collateral is considered as well as the degree of collaterized debt a firm has. The firms re second on assets (ROA) is included as a measure of the firms profitability. The debt ratio, which is the ploughshare of total debt on total assets, is considered for obvious reasons. The debt structure is incorporated to determine mainly the percentage of short-term and longterm to the total debt of the firm. The bank debt, measured as the percentage of debt owed to the bank in relation to the total debt, is taken into consideration.This is so because a firm receiving bank assistance for its debt restructuring may be affected because of their liabilities towards the ones helping them during their tumultuous times. Lastly, the restructuring period is added. A longer period would request more resources to be expended on the part of the straitened firm, in turn affecting the likelihood of success of its restructuring. Since this paper was made in the context of the Netherlands, the type of firms and all other relevant data were taken from said pastoral.The researchers self-possessed and classified 51 successful firms and 22 stillborn firms. The paper busy a qualitative response model (QRM), particularly the logit, to test their model in its multi-variate setting. The results of the empirical test were summarized in the subsequent tables (all taken from the paper) instrument panel 2. 1 shows that both classes of firms were relatively comparable in terms of their size despite the difference (Total assets), but this is signifi weedt only at the 10% level, meaning, the size discrepancy is not enough to be a source of bias in the results.In the industry level, i t mint be seen that the Manufacturing and the serve and Transport industries are the ones that experience a lot of financial distress (results were probatory at the 1% level, in other words, really significant). However, it is a different story between the two. The Manufacturing industry has more cases of unsuccessful restructurings whereas it is the other way around for the Services and Transport. The Other industries is also significant (10% level), which can mean that the researchers should have considered more industries rather than lumping them all in one.For the reasons of distress, it is surprising to see that only Overinvestment was significant (5% level). This can explain the reason why Manufacturing is on the top of the list overinvestment has led the firms to grow at irrepressible levels, which was also coupled by a decreasing demand for the firms products, leading to their demise. Table 2. 2 answers the main topic at hand, which is the determination of significant fa ctors (firm characteristics) to the probability of successful restructuring. These figures were taken pre-restructuring.The results show that the significant factors were those that relate to a firms debt. Moreover, it can be seen that unsuccessful firms had a really high debt ratio compared to the successful firms. It can therefore be concluded that a firms debt condition spells out its success or failure in debt restructuring. b. Significance This study can be useful for firms of all sizes and also to banks, the former to determine if restructuring is a wise decision given their debt situation, and the latter to decide if a financially-distressed irm is outlay helping given their financial constraints. To put it simply, it helps both parties (especially the banks) to maximize the use of their resources that will reap them the most benefits. This is also not limited to actual countries, since this can also be applied in developing countries like the Philippines. Policy-makers ca n also get value from the results of this study by implementing the allow rules in connection with this issue to ensure that the economic condition of the country will be protected from any harm that can come up from this.III. Relation to class discussion It was actually in class that I have first heard of restructuring, and of course how to address the accounting problems constitute by debt restructuring. In relation to this article, it actually deviates from the accounting issues learned in class, and takes it to another level, which is applying it in the real-world context. For my part, journal articles like these make me think that there is more to something that what we initially see.For instance, the class opened my eyes to the accounting position of debt restructuring, but this article made me appreciate this topic a substantial lot more because of the familiarity I have with the topic and the discussion itself. Moreover, it has enriched my friendship on the said topic. After this, I am really further to read a lot more to quench my thirst for fellowship not only in my chosen field of expertise, but also in anything I am curious about. After all, living a meaningful and satisfying life is not by being ignorant, but by being curious about the things around you.