What You See Is Not What You Get, Always! A Distorted but True View of Company Financials when Distressed

Cakir, Murat (2017): What You See Is Not What You Get, Always! A Distorted but True View of Company Financials when Distressed.

Abstract

Corporate failures and dismantling have become more and more widespread after the late 2007-2008 global crisis and individual as well as bulk numbers of multiple cases are almost as many, and the total economic impact more devastating since the Great Depression. In another study1 , I had discussed the importance of the roles of distressed non-financial firms in concert with the households in this crisis in a holistic network topological structure. In isolation though, the liquidation value of “the distressed firm” which is different from its going concern value, depending on what type, as well as the determination of financial and operational distresses, becomes a crucial part of the supervisory processes, also for investment purposes of banks and sole investors, if the firm does not recover from any of those.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate failure, financial distress, operational distress, liquidation value
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation; G - Financial Economics > G3 - Corporate Finance and Governance > G33 - Bankruptcy ; Liquidation; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M41 - Accounting; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M42 - Auditing

References

Cakir, Murat, "A Conceptual Design of “What and How Should a Proper Macro-Prudential Policy Framework Be?” A Globalistic Approach to Systemic Risk and Procuring the Data Needed," MPRA Paper 72832, University Library of Munich, Germany (2016). https://mpra.ub.uni-muenchen.de/72832/3/MPRA_paper_72832.pdf

Graham, Benjamin and Spencer B. Meredith, The Interpretation of Financial Statements: The Classic 1937 Edition, First HarperBusiness ed., 1998.