Balcaen, Sofie

Manigart, Sophie

Ooghe, Hubert

English

This paper analyses the duration of the time to exit of distressed firms, differentiating 
between involuntary exits (mainly bankruptcies) and voluntary liquidations. It examines how 
long firms survive after initial signs of economic distress. The study is conducted on an 
extensive dataset of 5,233 Belgian distress-related exits of non-starting firms, the majority 
being privately held. The results highlight that slack resources have an opposite effect on the 
timing of involuntary exits and voluntary liquidations. On the one hand, high levels of 
available and potential slack increase the time to involuntary exit, as they allow distressed 
firms to postpone an impending involuntary exit. On the other hand, high available slack 
resources shorten the time to voluntary liquidation as they make voluntary liquidation easier. 
Further, a high level of stakeholder dependence increases the time to exit after distress, 
whether the firm exits through a voluntary or through an involuntary procedure. This is 
explained by the fact that stakeholder dependence increases the complexity of the exit 
decision and the exit procedure.The authors would like to thank Antoon Lenaert (National Bank of Belgium), Cécile Buydens and Guy Delvaux 
(National Bank of Belgium) for their helpful cooperation with Sofie Balcaen’s doctoral research and provision 
of the requisite data. The authors also recognize the indispensable contributions of Wouter De Maeseneire, 
Charles Van Wymeersch and Didier Van Caillie and gratefully acknowledge the financial assistance of the 
Ghent University Special Research Fund

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From distress to exit: determinants of the time to exit

https://repository.vlerick.com/bitstream/20.500.12127/3196/1/Balcaen_S_WP_FromDistresstoExit.pdf

From distress to exit: determinants of the time to exit

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