Key Success Factors in the Revitalization of Distressed Firms: A Case of the Korean Corporate Workouts

This paper explores the empirical performances of the workout companies with special interests in the effectiveness of corporate reorganizing tools on their revitalization. In the empirical analysis it considers the criteria of success or failure in restructuring from both creditors’ and debtors’ perspectives in a separate manner. The key results are summarized as follows. First, the initial conditions on the debt structure of the workout companies are significantly related to the revitalization from both creditors’ and debtors’ point of view. Second, the debt restructuring instruments are insignificant in the success of corporate turnarounds, but the debt-to-equity conversion has been a relatively effective tool. Third, the selfrestructuring efforts, employment downsizing and governance reshuffling do not affect the performances significantly.