Restructuring programmes approved by court might be interrupted by liquidating bankruptcy. This Finnish case is similar to USA case where an enterprise is entering into bankruptcy proceedings while consummating confirmed reorganization plan. In general, the interruption rate is considered too high although it varies cross legislations. Quite typically only about half of the programmes (plans) will reach the consummation. A plethora of explanations have been given as to what are the failures' reasons. The discourse has not reached any agreement. Researchers, legislators, and lawyers are hunting for better understanding. The shortage of knowledge has been and is still a heavy burden for the whole system. The research presented here has a completely different approach to the tradition. The entrepreneur with a newly approved programme (confirmed plan) will be considered to be in a similar situation as an entrepreneur at her initial business start. The two groups of enterprises have similar survival expectations. From the new business research tradition we can learn about entrepreneurial behaviour while under meek conditions. There are still differences between the groups. The most apparent difference is that an entrepreneur with a reorganization plan is a sort of manifested agent for the creditors. She cannot consider herself "a free agent" as when starting her enterprise. The behavioural agency model leads us to risk orientation issues while running the business. The prospect theory is a powerful conceptual tool to describe individual risk orientation. Prospect theory, together with opportunity cost considerations, comprises a prolific ground to explain failures of reorganization plans. Through consummation the full discretion for the enterprise assets will be returned to the entrepreneur. The future value of the business under reorganization is the incentive like a traditional option for the entrepreneur to guide her in decision making. As prospect theory teaches us, the reward level pushes the entrepreneur to behave as a risk seeker in some cases. In some other cases the behaviour is risk averse. An optimal incentive does not drive the entrepreneur especially to seek or to avoid risks. This long run risk neutrality seems to be most favourable for survival expectations. The results have many obvious avenues to advance in research and in practise; in developing insolvency systems and in developing support systems for small enterprises in general.
|Publication status||Published - 2012|
|MoE publication type||G4 Doctoral dissertation (monograph)|