The reorganisation decision test: A risk analysis model to increase competitiveness

Abstract

This article provides a fresh perspective on the essential question: company reorganisation or bankruptcy? Competitiveness constantly reshapes business environments and strategic planning objectives. Any important management tool for increasing competitiveness should be based on effective risk analysis models that can integrate business reorganisation capabilities. Relevant findings regarding the process of choosing an optimal reorganisation pattern are discussed, and the conclusions are based on a study of a representative sample of insolvent companies that conducted a reorganisation. This inductive research process presents valuable insights and findings based on qualitative and quantitative analyses of the characteristics of insolvency procedures, proposing an original risk profile analysis model called the Reorganisation Decision Test (RDT). Cronbach’s alpha test, the principal component analysis (PCA), and the receiver operating characteristic (ROC) curve analysis were used to analyse the results and refine the company’s risk profile. The RTD was compared with the Altman Z-score to assess whether this classical bankruptcy prediction model is relevant in business reorganisation decisions, a topic that has not yet been thoroughly researched. The shortage of studies, data, and statistics in this area represents a challenge as well as an opportunity. Furthermore, an important information gap has been bridged using statistical indicators that can contribute to public macro-economic disclosures in this field. This model can also add value to professionals in the field of insolvency and provide valuable insights for various decisionmaking users.