Pursuing Firm Economic Sustainability through Debt Restructuring Agreements in Italy: An Empirical Analysis

Corporate restructuring has become a central topic for both academics and practitioners,
particularly following the global financial crisis. In particular, there is increasing interest in
understanding the effectiveness of turnaround strategies, which are defined as attempts to restore
the performance of firms after periods of downfall. However, despite the relevance of this issue,
there is a shortage of empirical evidence regarding the effectiveness of turnaround strategies related
specifically to financial interventions. Through the support of an empirical analysis among Italian
firms, this paper seeks to fill this significant gap in the available literature. In particular, we conducted
an in-depth analysis of 262 debt restructuring agreement (DRA) plans that occurred between 2005
and 2013 in 16 bankruptcy courts. Our study confirms the positive effect of changes in the top
management team. This measure can be both a symbolic signal of genuine willingness to modify
the strategy of the firm, and a real manifestation of the necessity to have new skills to complete
the turnaround. In addition, the adoption of operational and strategic/asset measures increase the
likelihood of turnaround success.