Investigating distressed venture decision-making during turnarounds

Abstract

ABSTRACT Background: Distressed decision-makers (business rescue practitioners or turnaround specialists) are confronted with various alternatives to make the appropriate decisions at various stages of a distressed business event. There are numerous variables that may affect the decisions to be made by a distressed decision maker during a distressed business event. Aim: To develop a better understanding of the variables that influence decision-making in business distress by identifying, confirming, and explaining the major variables that affect decision making for distressed decision makers. Setting: Licensed business rescue practitioners or turnaround professionals in the Gauteng province of South Africa. Methods: A qualitative research design made use of 12 semi-structured interviews. Casual maps were constructed by participants to provide insights into the most relevant and influential variables to their decision-making process. Results: Distressed decision makers do not have one specific decision-making process, and decision-making is largely situation dependent. The Companies Act, creditors, stakeholders, time, liability of data integrity, reasonable prospect, reputational risk, and experience were the most influential variables. Reasonable prospect was found to drive the decision-making process. Lastly, a distressed decision-making framework was derived in which distressed decision-making results from awareness, severity, confidence, personal and external variables, causality, and effectuation. Conclusion: Reasonable prospect is central to distressed decision-making. Awareness, and severity influence confidence to make decisions, as well as the personal and external variables, which are in turn influenced by causality and effectuation. Contribution: The article provides valuable insights on distressed decision-making and influencing variables during a distressed business event and derived a distressed decision-making framework.