Abstract
We investigate the influence of bankruptcy reorganization plans on the recovery of distressed firms. Using qualitative comparative analysis (QCA), specifically, we perform an in-depth investigation of a set of reorganization plans submitted by publicly traded companies in Brazil. We find that the improvement in firm performance is positively related to a good diagnosis of the factors causing the crisis, a clear definition of the firm’s resources, and a clear identification of the firm’s competitive strengths. We also find that the absence of a good industry analysis is a critical condition for a reorganization plan to fail. However, the explicit mentioning of the firm’s relevant market is negatively associated with the company’s uplifting in crisis. We discuss the theoretical and managerial implications of these findings.
Keywords:
business failure; reorganization plan; bankruptcy protection; strategy
Source: elaborated by the authors, based on 
Largely, the intermediate steps of a plan reflect the competence of the firm in analyzing the interface between the business environment and the company’s own characteristics. This demonstrates the ability of the firm to understand its sources of competitive advantage, leading to our interest in reading between the lines of a plan as a proxy of a company’s strategic competence. We are not interested merely in the recovery means employed by companies. We want to understand how the design of a plan may affect the performance of the firm. Accordingly, taking as a reference the discussion on the strategic ingredients of reorganization plans, we now present our empirical analysis. We base our investigation on reorganization plans developed by publicly traded companies in Brazil. To accomplish this task, we set up a unique database and develop a specific performance measure.