The Reorganization of the Italian Distressed Firms: A Dynamic Approach to Assess the Conditions Leading to Resilience or Failure

This chapter examines the comparative efficiency of judicial and extrajudicial solutions to corporate crises, focusing on Italy’s preventive agreement (concordato preventivo) under Article 160 of the bankruptcy law. Utilizing a sequential logit model, this study analyzes the determinants influencing various stages of financial distress resolution, including court admission, creditor approval, and court homologation, based on a dataset of 728 cases from 13 courts in Tuscany and Puglia. The analysis reveals significant ex-ante and ex-post determinants that shape the outcomes of preventive agreements. Key findings include the predictive power of financial indicators like Z-score and leverage during creditor approval phases, the critical role of governance structures, and the nuanced impact of management control and fresh money infusion. The study also underscores the importance of court monitoring and plan methodology, particularly distress analysis and cash flow projections, in navigating insolvency proceedings. This chapter advances the understanding of corporate crisis resolution, offering valuable insights for practitioners and policymakers aiming to optimize restructuring processes.