The Value of Corporate Financial Measures in Monitoring Downturn and Managing Turnaround: An Exploratory Study

摘要

This study investigates the turnaround experience of 42 firms and tracks their success through financial ratio analyses. Financial ratios based on company data varied with stages of the turnaround process. Factor analysis reveals distinct patterns underlying the financial ratios in each phase of the turnaround process. Temporal changes in the factors are used in a discriminant analysis for each phase to explain turnaround versus non-turnaround. Financial data from each phase explain nine to 13 percent of the variance in the firms' ability to achieve turnaround, with company attention to operating efficiency emerging as the key factor.