TITLE:
Successful Metamorphosis or Not? —A Case Study of the Bankruptcy Reorganization of Northeast Special Steel
AUTHORS:
Lu Lu, Yuhua Sheng
KEYWORDS:
Bankruptcy Reorganization, Organizational Restructuring, Firm Control, Firm Development
JOURNAL NAME:
Modern Economy,
Vol.10 No.5,
May
24,
2019
ABSTRACT: On October 10, 2016, Fushun Special Steel issued a
notice announcing that its controlling shareholder, Northeast Special Steel,
entered the bankruptcy reorganization process due to nine consecutive defaults
and nearly 5.8 billion RMB in liabilities. Bankruptcy reorganization can help
solve the debt problems faced by such inefficient zombie firms, and restore
their ability of sustainable operation and profitability. However, since
reorganization effects only a change in debt structure and of stakeholder
composition, whether the newborn entity has the ability to manage and operate
the firm is critical. Therefore, the reorganization can only solve the
institutional problems but not the managerial problems; that is, institutional reorganization cannot be automatically converted
into behavioral change. Thus, when analyzing the implementation process of
reorganization from the perspective of firm management, several questions
arise: who should take control in the process of reorganization? How should the
organizational structure of the restructuring firm be reorganized? How to
reconfigure the internal human resources of the firm? Whether the former
industry leader can properly handle these problems in the reorganization
process is worthy of further discussion.