A Critique Paper on the Article: "It Takes Two to Tango: an Empirical Tale of Distressed Firms and Assisting Banks"

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  • Topic: Debt, Bankruptcy, Finance
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  • Published : April 23, 2012
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2401, Taft Avenue, Manila, Philippines

De La Salle University

It takes two to tango: An empirical tale of distressed firms and assisting banks

A Critique Paper

In Partial Fulfillment of The Requirements In MODADV1

Submitted by: Fernando, Anna Margarita B.

Submitted to: Dr. Rodiel C. Ferrer

Date September 28, 2011

I.

Introduction The business world can be likened to a Pandora’s Box. It is filled to the brim with a cacophony of surprises, which can be either beneficial or detrimental to businesses. There had been rampant news about economic crises that come and go due to a variety of reasons. More often than not, these crises affected a number of countries, and not surprisingly, a lot of businesses as well, especially those that operated in the affected countries. The issue here now is how a business’s top management will respond when faced with the repercussions of a crisis. Of course, there are many courses of action to choose from, and one of these options is restructuring. Corporate restructuring is entered into by firms that deemed that no other viable options exist but this. The usual form of restructuring is debt restructuring, wherein the creditor and the debtor renegotiate the terms 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 sensible creditor would agree to this knowing it would be disadvantageous on his part. One of the main reasons why creditors agree to this arrangement is because of its relationship with the debtor. If it is in good terms with the debtor or has a history of mutual benefit, creditors would then consider this option, notwithstanding the detriments on its part. Restructuring is not also limited to corporate bodies. Any types of businesses, may it be small, medium or large enterprises, may use this option. In fact, this paper tackles the restructuring process and the probability of its success based on small- and medium-sized...
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