Assessment of formal proceedings and out-of-court reorganisation: results from a survey among turnaround professionals in Austria

This study analyses the decision criteria for a specific form of reorganisation in a creditor-friendly bankruptcy system such as that of Austria. From a neoinstitutional perspective, we present different forms of bankruptcy law and the specifics of reorganisation in Austria. Next, we show several distinctive criteria and influencing factors for formal reorganisation and workouts. We group these factors into constitutions and institutional settings, process and handling, and implementation of the reorganisation. Using a sample of 411 survey responses from turnaround professionals, our empirical study analyses the decision criteria for a specific form of reorganisation. We apply a multivariate approach comprising two-sided paired samples Wilcoxon tests to assess the derived hypotheses and a hierarchical cluster analysis. Our results indicate significant differences in the valuation of the two forms: the turnaround professionals rate public perception much higher for out-of-court reorganisation, whereas legal certainty is rated significantly better for formal proceedings. Regarding process and handling, transparency and the handling of blocking positions are arguments for formal reorganisation, whereas flexibility is valuated better for workouts. In terms of implementation, respondents see advantages for out-ofcourt reorganisation, as it facilitates the implementation of both financial and operational measures. Taxation, the handling of blocking positions, and the improvement of public perception were identified as key development aspects for the legal framework conditions of the various reorganisation forms.