From Crisis to Recovery: The Impact of the WHOA on Agency Problems During Corporate Restructuring
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2024-08-26
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en
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The global economy continuously faces the challenges and opportunities associated with business restructuring and insolvency, especially in the aftermath of the COVID-19 crisis, which has led to widespread financial distress among businesses. Many viable companies, burdened by high debt and payment delays, could potentially avoid bankruptcy through effective debt restructuring. However, the restructuring process often requires cooperation among various stakeholders, which can lead to agency problems due to conflicting interests. Such conflicts can hinder the restructuring efforts, exemplified by cases where a single creditor may block an agreement for personal gain. To address these challenges, the Dutch legislator introduced the Act on the Confirmation of Out-of-Court Restructuring Plans (WHOA), which provides a legal framework for restructuring financially distressed companies. The WHOA includes mechanisms such as cram-down agreements and safeguards to mitigate agency problems, align stakeholder interests, and reduce information asymmetry. This research aims to analyze how the WHOA impacts agency problems during the restructuring of companies in financial distress, using agency theory as a lens to explore the dynamics between stakeholders. By examining the effectiveness of the WHOA, the study seeks to contribute to a deeper understanding of its role in saving viable companies from bankruptcy and enhancing sustainable performance
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Faculteit der Managementwetenschappen