The study of organizational decline and turnaround has taken on renewed importance as we have seen record bankruptcies over the past few years. Financial distress is descending financial condition before bankruptcy or liquidation. The responses of financial distress range from denial of the problem, to reliance on stringent internal controls, to reduction of scale and scope of operations, to top management turnover and the dissolution of the organization (Schendel and Patton, 1976 in Francis and Desai, 2005).
With the broad domain of issues and implications associated with decline and attempted recoveries {i.e turnaround), the ability to formulate appropriate strategic responses is of prime consideration for management researchers and practitioners. We view decline as a result of erosion of product resource. Therefore( to manage a turnaround manager must focus on stemming the erosion of resource, effectively using the existing resources and concurrently maintaining a firm's ability to replace and / or add resources.
This research aim is to analyze the influences of multiple organizational factors which are trend of severity health firm, free assets, size, and assets retrenchment on turnaround outcomes or recovery of financial performance probability prediction of non finance companies listed in Jakarta Stock Exchange (JSX) from 200S to 2011. Data used in this research are secondary ones which obtained from Indonesian Capital Market Directory (ICMD). Financial data from 2010 to 2011 are processed ones used to independent variabels and data in 2008¬2011 are used as guidance to determine financial status calculated by Altman's Z-Score model. This research uses 107 non finance companies as samples which consist of 92 Non Recovery (NR) and 15 Recovery (R) ones. To identify distressed companies that have turnaround potential, a discriminant model was used. And a logistic regression model was used to detect organizational factors that contribute to the success of turnaround. The results indicated that (he severity of financial performance, free assets, and size were strongly linked with the likelihood of turnaround success. Yet, the analysis revealed no significant relationhip between asset retrenchment and turnaround outcomes. |