an exploratory study of company turnaround in australia and singapore following the asia crisis

Asia Pacific Journal of Management, 21, 149–170, 2004c© 2004 Kluwer Academic Publishers. Manufactured in The Netherlands.

An Exploratory Study of Company Turnaround inAustralia and Singapore Following the Asia Crisis

GREGORY FISHER∗ [email protected] LEELEANNE JOHNSSchool of Business and Information Management, Faculty of Economics and Commerce, The Australian NationalUniversity, Canberra ACT 0200, Australia

Abstract. There has been little research into company turnaround practices in Asia. This paper investigates therole of retrenchment, replacement of chairman or chief executive and ownership change in the turnaround process,using a sample of 60 listed companies in Australia and Singapore. Conclusions are drawn that overall, transparencyof the regulatory environment and other governance issues are a stronger influence on turnaround practices thanare cultural issues. This may make Singapore, which has transparency and governance risk indicators at similarlow levels to Australia, a unique business environment in Asia.

Keywords: company turnaround, retrenchment, culture, governance transparency, Australia, Singapore

There is a growing body of research into factors that contribute to the effective turnaroundof a distressed company. However, despite the increased emphasis on this important areathe suggested strategies are still rudimentary in nature (Bruton and Rubanik, 1997). Pandit(2000) has also been critical of both the depth of theoretical analysis, and the methodologyused, to investigate company turnaround.

A review of the literature identified eight actions that commonly appeared in descriptionsand empirical tests of the turnaround process: recognition of decline problem (e.g. Bruton,Ahlstrom and Wan, 2001), retrenchment (e.g. Bruton and Rubanik, 1997; Robbins andPearce 1992; Pearce and Robbins, 1994), matching the solution to the cause of decline (e.g.Barker III and Duhaime, 1997; Bruton, Ahlstrom and Wan 2001; Castrogiovanni and Bruton,2000; Harker, 1996), replacement of the Chief Executive Officer or top management team(e.g. Imberman, 2000; Umbreit, 1996; Dunstan, 2002; Belcher and Nail, 2000; Balgobinand Pandit, 2000), ownership change (e.g. Bruton, Oviatt and White, 1997; Castrogiovanniand Bruton, 2000), speed of action and rate of (pre-turnaround) decline of the distressedcompany (e.g. Bruton, Ahlstrom and Wan, 2001; Castrogiovanni and Bruton, 2000). Thereis however, disagreement within the Western literature as to the role and importance of theseitems to the successful turnaround of companies.

The majority of the literature on turnaround focuses on Western countries (Bruton,Ahlstrom and Wan, 2003). Two exceptions to this are recent papers by Bruton, Ahlstromand Wan (2001, 2003). In the earlier paper Bruton, Ahlstrom and Wan (2001) questioned if

∗To whom all correspondence should be addressed.

150 FISHER, LEE AND JOHNS

the Western model of turnaround of large publicly traded firms could be applied to similarfirms in East Asia. They claimed that there were differences, in part based on culture, in thebusiness environment in which organisations in Asia operated, which in turn influenced theturnaround actions of distressed firms. Specifically they identified differences in recogni-tion of the problem; retrenchment; matching the solution to the cause of decline, replace-ment of chief executive officer, and speed of turnaround. They used a qualitative, interviewbased research process using a sample of turnaround consultants and company managers inThailand and Hong Kong. The focus of their paper was on the likelihood of action occurring,rather than the impact of such actions on the turnaround performance of the company.

Bruton, Ahlstrom and Wan (2003) reported on a quantitative study of 90 firms fromSingapore, Hong Kong and Taiwan who experienced turnaround prior to 1998. The sampleused was from a database of companies covering the period 1979 to 1998. Their selectionof firms in crisis required 3 years of decline in ROI and 3 years of recovery. As such, firmswould have commenced their decline prior to 1991 and recovery prior to 1995. These timeframes are both before the Asia crisis.

Bruton, Ahlstrom and Wan (2003) extend some aspects of their previous research, tospecifically include a performance focus. They investigate the impact of asset reduction,sales increase, accounts receivable reduction and replacement of Chairman of the Board onfirm profitability. Interpretation of their findings was supported by qualitative interviews withturnaround consultants operating in East Asia. They found that ‘strong outside pressures theinstitutions carried by the strong culture of Overseas Chinese business people in East Asiacan still limit the actions that are understood as important to firms undertaking turnaround inthe West’ (2003:535). As such, the Western turnaround model was not uniformly applicablein East Asia.

In part, the research reported here is a quantitative study, using a sample of 60 distressedSingaporean and Australian companies, of the items identified by Bruton, Ahlstrom andWan (2001). However, as the research reported in this paper focuses on companies in theAsia-pacific post the Asia crisis, we have assumed that the dominant reason for declinewas related to the Asia crisis ‘event’. While it is possible that firms might start to declinebefore or after the crisis, the characteristic exhibited by our sample supports this assumption(see figure 1 in a later section of the paper). On average, our sample experienced a peakin financial performance in 1996 and a sharp decline from 1997 to 1999. It indicates thepossibility that the crisis could have triggered the recognition of decline. As such, we havenot tested either recognition of the problem or matching the solution to the cause of decline.The scope of our paper also does not cover the relationships between accounts receivable,sales and profitability addressed in Bruton, Ahlstrom and Wan (2003). As our study aimsto compare how various turnaround actions contribute to successful business performancein the two countries, we focus only on companies which survived after the crisis and howthey responded to the decline.

We contribute to existing research in a number of ways. Firstly in line with the Westernliterature, we have included ownership change, change of Chairman, change of CEO, re-trenchment, and rate of decline in our investigation. Secondly, we incorporate both cultureand governance transparency in our analysis. Thirdly, we investigate both the likelihood ofactions occurring and the impact of those actions. Finally we focus on the period of the

COMPANY TURNAROUND IN AUSTRALIA AND SINGAPORE 151

Figure 1. Return on equity for Australian and Singaporean companies.

Asia crisis and beyond, placing our investigation in a contemporary, rather than historicalframe. Given the impact this event had on businesses in the region, it is opportune to inves-tigate the actions taken by companies who experienced recovery after 1997. Such a focusalso enables conclusions to be drawn on convergence of business practices and the role ofcultural institutions.

Culture, transparency and country selection

The research in this paper, in part, replicates and extends the research undertaken by Bruton,Ahlstrom and Wan (2001) that attributes differences in the actions taken in turnaround inAsia to shared cultural perspectives within the two countries included in their study, Thailandand Hong Kong. As with many such studies, they used Hofstede’s (1980) cultural frameworkin their analysis. By contrast, in the literature, accounting practices (e.g. Rubach and Sebora,1998; Core, Holthausen and Larcker, 1999), international market entry (e.g. Hill, 2000),transparency and related governance issues, have been seen to influence the decision-makingprocesses of firms. These two viewpoints fit at opposing ends of the convergence divergencecontinuum. As economic development increases, cultural factors, which lead to divergencein business practices, become less important than other factors in the business environment,which leads to convergence of business practices.

A broadly accepted method to measure governance transparency is the instrument de-veloped for the World Bank by Kaufmann, Kraay and Zoido-Lobaton (1999, 2002). Theyidentify six facets of governance: voice and accountability, political stability, governmenteffectiveness, regulatory quality, rule of law and control of corruption. This research isbased on a comparison and integration of 16 private sector and international organisationindices of governance, transparency and corruption, covering 165 nations.


For theoretical and practical reasons we have chosen to use Australian and Singaporeancompanies, rather than companies based in Thailand or Hong Kong. Firstly, to opera-tionalise our research we needed to gather sufficient data on companies in decline from amulti-country database to enable comparisons to be made. Secondly, we needed to identifycountries that had similar levels of governance transparency, but clearly different cultures,in the Asia Pacific region. Our initial investigation of criteria, by a search of the Osirus,Factiva and Connect4 company data-bases to which we had access, narrowed our search toAustralia and New Zealand as countries with a ‘predominantly Western cultural heritage’and Hong Kong, Thailand, and Singapore, as countries with a ‘predominantly Asian culturalheritage’.

We chose Australia over New Zealand, because the initial screening process used toidentify companies in decline generated a sample of 38 such companies in Australia, butonly 11 in New Zealand.

We eliminated Thailand for four reasons. Firstly, in our initial examination of thedatabases, we identified a number of data quality and reporting issues including a highpercentage of incomplete, or inconsistently reported, data. Secondly, issues such as inad-equate legislation, or inconsistencies in the enforcement of existing legislation, particu-larly in relation to governance and bankruptcy, make within-country comparisons difficultand cross-national comparisons doubly so. Thirdly, the changing political environment,including a change in government and the legislative uncertainty that resulted from theadoption of a new constitution during the period of our study, imposed additional complex-ity to the business environment that may confound analysis of company turnaround. Thisis not, of course, to say these issues are unimportant to company turnaround in Thailand.Rather, they should be the focus of another paper. Finally, Thailand has very different gov-ernance scores to those of Australia, Hong Kong and Singapore. As such, the interpretationof the contribution of governance transparency and culture would be more difficult to make.Again, such an investigation should be the focus of further research in the future.

With the exception of voice and accountability, where Australia has a higher ratingthan Singapore and Hong Kong, all three countries are similarly highly rated. We choseSingapore over Hong Kong for several reasons. Firstly, we felt that the upheaval in thebusiness environment that resulted from the hand back of Hong Kong in 1997 injectedadditional complexity to the business environment that may unduly influence our findings.Not only did this affect business confidence, but it also impacted directly on the turnaroundvariables. For example, Australia saw a dramatic rise in foreign direct investment by HongKong companies, and migration of middle and senior managers, professionals and businessowners from Hong Kong, in the period prior to the handover. We felt that this made itimpossible to attribute, for example, change of CEO or divestment to turnaround processes,when they could be merely choices being made by individuals and companies in responseto economic and political uncertainty. Secondly, given the rapid moves towards a free tradeagreement between Australia and Singapore, and the growing foreign direct investmentoccurring between the two countries, as Australian-based researchers we felt that Singaporewas a more interesting focus than Hong Kong.

We note here, that by selecting Singapore and Australia we are not arguing that thesecountries are typical of either the ‘Anglo West’ or of Asia. Indeed, both countries have in


some ways unique, constructed cultures that do not fit into the cultural stereotypes of theWest or Asia respectively. However, we argue that the countries are similar to each other ingovernance transparency, and different to each other in terms of culture.

In terms of the legal and governmental regulatory environment, Australia and Singaporeare similarly highly rated on five of these six facets. The only factor in which they diverge isvoice and accountability, where Australia is near the top of the index and Singapore is midranked. Arguably, therefore, the legal contexts of the two nations are similarly transparent.

While there are some shared cultural aspects, Australia is not ‘Asian’ and Singaporeis not ‘Anglo Western’. Australia is predominately Anglo-Celtic or European in ethnicbackground, with approximately five percent of the population identifying as of Asianethnicity (ABS, 2000). Australia’s economic and population growth over the past 60 yearshas been based on high levels of migration. While initially the majority of migrants werefrom Europe and the Middle East, since the late 1960s there has been significant levels ofmigration from Asia (ABS, 2000). This peaked at 51% of migration to Australia in 1990–91.Immigration from Asia is still 33% of total migrants, and 49% of skilled migrants (ABS,2003). Government social policy supporting multiculturalism, a migration policy aimedat attracting educated professionals and managers regardless of ethnicity, has led to highrepresentation of people of non-European background in managerial and professional roles(Fisher and Brewer, 2000). This, coupled with high levels of intermarriage across ethnicgroups and the propensity of its population for extended international sojourns, has led toa degree of cultural openness (Fisher and Brewer, 2000).

While both countries are multicultural, Singapore is multicultural from Chinese, Malayand South-Asian roots, with a smaller contingent of Europeans, while Australia’s populationdiversity is predominantly based on people from different European and Middle Easternbackgrounds, with smaller numbers of Asian background. Using the model developed byHofstede (1980), Australia is described as a low power distance, highly individualisticcountry. In contrast, Singapore is described as high power distance and collectivist. Bothcountries exhibit relatively weak uncertainty avoidance. Hofstede and Bond (1988) alsoidentify Singapore as having strong confusion dynamism, which is exhibited through workethic, long-term focus, and adherence to traditional Confucian values.

However, since the 1970s the Singaporean government has undertaken ‘socialre-engineering and cultural change [that] entailed demobilizing Singapore’s ethnic aspects’(Haley and Low, 1998:530). Singapore is a multi-ethnic society built on migration, ‘criss-crossed with inter-racial marriages’, and influenced by both ‘the common denominator ofOverseas Chinese and Chinese heritage’ and the concentration of multinational corpora-tions, which leads to ‘a cosmopolitan culture not found in the rest of ASEAN’ (Haley andLow, 1998:536–37). While the antecedents of government policy may have been ‘ethni-cally neutral’, ‘the international appearance of the Asian values discourse and hyphenatedidentities’ moved the policy to one where ‘Asian modernity should be able to bridge thegap between tradition and modernity that existed in the West’ (Wee, 2000:129). Thus, theargument is that ‘Singapore has created a business orientated culture, within governmentbureaucracy’ that is a ‘hybrid of Chinese and Western [Cultural] assumptions. . . . . . makingSingapore the kind of clean, non-corrupt, crime free, efficient environment that businesspeople were looking for’ (Schein, 2001:45).


This social engineering also raises issues in terms of institutional theory. North (1990)argues that when formal institutional constraints on behaviour fail, the informal institutionalconstraints, based on culture, come into play. (c.f. Peng and Heath, 1996). Peng and Heath(1996) and Allen (1990) suggest that this is more likely to occur when the formal regulatoryenvironment is less developed. (c.f. Ahlstrom, Bruton and Wan 2003). There is also evidenceof strong historical links between culture and aspects of accounting and financial practices(e.g. Core, Holthausen and Larcker 1999; Gray 1988; Rubach and Sebora, 1998). As such,given Singapore’s high level of governance transparency, which could be equated to formalregulatory institutional constraints, and the socio-cultural engineering that attempted tomodify the informal culture-based institutions, it could be expected that the institutionalenvironment in Singapore would be unique, or at least be less influenced by traditionalChinese cultural values than other East-Asian countries.

However, despite this apparent uniqueness in East Asia, there is support for the roleof underlying cultural values having an influence on aspects of company management inSingapore, including organisational design, planning and control (Harrison et al., 2001),individual performance (Fraser and Zarkada-Fraser, 2000; Wong and Phool-Ching, 2000),motivation (Couger, 1986), and risk assessment (Williams and Narendram, 1999). Fur-ther, when comparing leadership styles in China, Hong Kong, Singapore, and Taiwan, Liet al. (2002) found that ‘despite the development and change in Chinese societies somedimensions of leadership style remain unchanged [and] cultural heritage will continue toinfluence the leadership style in these societies for some time’ (2002:59). Further, Bruton,Ahlstrom and Wan (2003) identified the importance of culture in relation to aspects ofturnaround in Overseas Chinese businesses in Singapore.

There is also a difference in the level of government involvement in business. There areno clear figures related to this construct in the Australian setting. We suggest this is because,in a comparative context, the level of Government controlled business in Australia is notparticularly different from the range exhibited in other economically developed countries.For Singapore, however, it is an important issue in the international context. The StateDepartment of the United States claims that government related business in Singaporeaccounts for 62 percent of Singapore’s GDP (US State Department, 2000). The SingaporeanGovernment (2001) argues that the figure is less than 20 percent, with foreign-ownedmultinationals, by comparison, contributing 30 percent of GDP. Regardless of the truefigure, this represents a difference in the business environment between the two countriesour study focuses on.

Turnaround actions

The role of retrenchment

There are conflicting findings in the literature as to the role played by retrenchment in theturnaround process. Retrenchment has not been defined explicitly but Robbins and Pearce(1992:287) refer to it as ‘a term that denotes a strong emphasis on cost and asset reductionsas means to mitigate the conditions responsible for financial downturn’. Barker III and Mone


(1994) and Balgobin and Pandit (2001) accepted this explanation and also used ‘asset andcost reduction’. For this study, retrenchment has been defined as asset divestment and costreduction, often by downsizing.

Robbins and Pearce (1992) describe the objectives of retrenchment as survival and achiev-ing a positive cash flow. These are immediate short-term actions. Indeed, in their seminalarticle, Robbins and Pearce (1992) found that retrenchment, followed by a recovery stage,was a significant first step for turnaround success, regardless of the cause of corporatedecline. The turnaround response consisted of two overlapping stages: the retrenchmentstage and the recovery stage. The retrenchment stage consisted of liquidation, divestment,improvement of operational efficiency, product elimination and head count cuts, with theobjectives being that of survival and positive cash flow. The recovery stage consisted ofentrepreneurial moves (new markets, acquisitions, market penetration), with the objectivesbeing long-term profitability and market growth (p. 291).

Robbins and Pearce (1992) thus appear to regard retrenchment as a short-run tacticalresponse, as opposed to a broad long-term strategy. The lead of Robbins and Pearce (1992)has been followed in much of the retrenchment literature (e.g. Chowdhury and Lang (1996),Bruton and Rubanik (1997), Balgobin and Pandit (2001)). Chowdhury and Lang (1996),in a study of small manufacturing firms, supported the focus on efficiency and cost cuttingrather than strategic actions, while Bruton and Rubanik’s (1997) study on a Russian firmfound that retrenchment and cost cutting was part of the successful turnaround. In addition,researchers who investigated the role of downsizing, or cost cutting via retrenchment ofstaff, found that this was an important element in turnaround success (Umbreit, 1996;Vaz, 1996; Bruton and Rubanik, 1997). Balgobin and Pandit (2001), while recognising theneed for strategy, also concluded that retrenchment was a necessary step in the turnaroundprocess. Therefore, we have interpreted retrenchment as a short-term efficiency measure.In particular, for the purpose of our study, retrenchment is primarily for cost reduction andcash control.

In contrast to literature on the importance of retrenchment, Harker (1996) andCastrogiovanni and Bruton (2000) note that much of the research conducted prior to 1992emphasised the need for turnaround to focus on strategy. Barker III and Mone (1994)claimed that there was little evidence to support the assertion that retrenchment was essen-tial to turnaround, while Barker III and Duhaime (1997) and Barker III and Barr (2002)concluded that strategic turnarounds did exist and that the level of strategic change variedaccording to whether firms needed strategic change to recover and if they had the capacityto implement it.

Most recently, Castrogiovanni and Bruton (2000) replicated and extended the Robbinsand Pearce (1992) model and examined the effect of retrenchment following acquisition,using a sample of 46 distressed firms from the United States. They included capital infusionand integration in their variables. Their results found no significant retrenchment effecton performance but indicated that capital infusion (by corporate owners) and integrationinto the parent company’s other businesses did affect performance. Capital infusion mightresult in a worse performance, while integration seemed to be beneficial. Thus, their resultspotentially limit the Robbins and Pearce II (1992) findings when businesses are acquired byother firms as part of the turnaround process. Castrogiovanni and Bruton (2000) maintain


that more research is needed before acceptance of the idea that retrenchment is an essentialfirst stage for successful corporate turnaround.

In the East Asian context, Bruton, Ahlstrom and Wan (2001:153), while identifying that‘in some settings retrenchment would occur in a manner similar to the west’ found theconsensus view that the ‘ability to retrench is limited’ in East Asia. They attributed this tocultural reasons and the less than transparent nature of accounting in East Asian countries.However, in their study on Overseas Chinese East Asian firms, Bruton, Ahlstrom and Wan(2003) found that retrenchment when it did occur, improved performance during the declineperiod.

Change of the top management team

The importance of Chief Executive Officer (CEO) and Chairman (Imberman, 2000; Umbreit,1996; Dunstan, 2002; Belcher and Nail, 2000; Balgobin and Pandit, 2001) sometimes meanta change of CEO or Chairman might be necessary for successful turnaround (Belcher andNail, 2000; Umbreit, 1996; Balgobin and Pandit, 2001). Dunstan (2002) claimed that achange of top management such as a CEO, could turn around the stock market perceptionof a company. Barker III and Patterson (1996) suggested that top management change mightbe an attempt to placate stakeholders or that weak managers might lose their positions, butnot strong managers. A CEO who had a clear understanding of the strategies necessary toaccomplish a successful turnaround and who could communicate those strategies throughoutthe organisation, was essential (Imberman, 2000). In contrast, Mueller and Barker III (1997)in their study on the importance of top management team change to turnaround, foundthat a change was not a strong predictor of turnaround although strategic leadership wasimportant. Barker III and Barr (2002) asserted that change of leadership was more likelywhen the decline was ascribed to internal reasons, or for external reasons that could havebeen controlled.

Bruton and Rubanik (1997) pointed out the difficulties of changing top management in aRussian firm compared to an American firm, and concluded that culture might be a limitingfactor. Harker (1998) discussed leadership and agreed that it was a vital element in theturnaround process. His emphasis, however, was on the importance of a good marketingperspective to strategic management, because companies had to develop sustainable com-petitive advantage. This point was raised also by Imberman (2000), who held that companieshad to define their market and know what it wanted.

Bruton, Ahlstrom and Wan (2001) found a consensus view that it was more difficult tochange CEOs or reorganise the top management team in East Asia than in the West, and thatit would usually not be done, or if it was, the result would be negative (2003). They attributedthis to cultural reasons, the higher degree of family roles in ownership and managementof East Asian companies, and difficulties in finding a suitable CEO. Given that frequentlythe CEO and chairman of the board are the same person in many Asian countries, onewould expect the chairman to be more powerful, which could also make it more difficultto change. Bruton, Ahlstrom and Wan (2003) found that changing firm leadership may beimpractical for Overseas Chinese East Asian firms because of the strong owner-managerrole, the importance of guanxi and the support generally given to top management from East


Asian boards (2003:534). Most Australian corporations have separation of board chair andCEO (Donaldson and Davis, 1991). This could well be because of national or cultural factorswhich would inhibit adoption of dual roles (1991:61). Daily and Dalton (1997) questionedwhether separate board leadership was necessary for performance in times of crisis, althoughthey acknowledged that further research was needed in this area. Donaldson and Davis(1991) claimed that duality of top management positions actually assisted organisations toachieve superior performance because power and authority rested with one person. Theydid not, however, address performance of declining firms.

Ownership change in Asian turnarounds

While ownership change is often a precursor to turnaround in the Western literature, Bruton,Ahlstom and Wan (2001) did not directly deal with this variable in their study. However,in their discussion of change of CEO and chairman, they identified barriers that exist infamily-owned companies which limit outside investment. Further, the lack of accountingtransparency, which they discussed in reference to retrenchment, would also act as a barrierto ownership change or capital infusion.

Speed of turnaround

In explaining the development of our measure of turnaround success, which appears laterin this paper, we describe the issues related to turnaround speed that flow from the literatureon Western companies. Bruton, Ahlstrom and Wan (2001) found the consensus view thatturnaround will be slower in Asia than in the West.

Hypotheses

Based on our review of the turnaround literature, and our assessment of the similarities anddifferences between the socio-cultural and business environment of Australia and Singapore,we have developed two groups of hypotheses.

The first group of hypotheses addresses the likelihood that a particular turnaround actionwill occur, and the speed at which these changes are likely to occur. Bruton, Ahltromand Wan (2001) argued that the consensus view of their sample of turnaround consultantswas that cultural factors would limit both the likelihood of and speed of retrenchment andchange of CEO, and identified barriers to outside investment based on family ownershipof companies. Based on our review of this and the broader literature on turnaround, wehave selected four common turnaround actions to investigate: Change in CEO; Changein Chair; Retrenchment; and Change of Ownership. If culture is the determining factoron the management decisions related to these actions, we would expect in all cases thatSingaporean companies would be both less likely to take these actions than Australiancompanies. In addition, if Singapore companies do take these actions, they would do somore slowly than Australian companies. If, however, transparency and governance issuesare the driving contextual force of the management decisions, based on the similarities of the


governance scores in Singapore and Australia, we would expect no significant difference inthe likelihood of, and speed of, these actions by Australian and Singaporean Companies. Onbalance, despite Bruton, Ahlstrom and Wan (2001) finding that culture was the determiningfactor, the weight of the literature supports governance transparency being the strongerdetermining factor. We therefore predict that there will be no difference in the likelihoodof change of CEO, change of Chair, retrenchment or change of ownership. Similarly, wepredict no difference in the speed of retrenchment or the speed of change of CEO or Chair.However, while we predict that given the extent of the role of government related businessesin the Singapore economy, there will be no difference in the likelihood of ownership change,the speed of that change in Singapore will be slower than in Australia.

Hypothesis 1A. There will be no difference between Australian and Singaporeancompanies of the likelihood of change of CEO.

Hypothesis 1B. There will be no difference between Australian and Singaporeancompanies in the speed of CEO change.

Hypothesis 2A. There will be no difference between Australian and Singaporeancompanies of the likelihood of change of Chair.

Hypothesis 2B. There will be no difference between Australian and Singaporeancompanies in the speed of change of the Chair.

Hypothesis 3A. There will be no difference between Australian and Singaporeancompanies of the likelihood of retrenchment.

Hypothesis 3B. There will be no difference between Australian and Singaporeancompanies in the speed of retrenchment.

Hypothesis 4A. There will be no difference between Australian and Singaporeancompanies of the likelihood of change of ownership.

Hypothesis 4B. Ownership change will occur more quickly in Australian companiesthan in Singaporean companies.

Our second group of hypotheses relate to the results of the turnaround actions taken by thecompanies in the two countries. The similarities in the business environments of the twocompanies (with the exception of the degree of government ownership of companies) lead usto predict that if turnaround actions are taken, there will be no difference between the speedand degree of turnaround between the two countries. We predict, based on the companyturnaround literature, that companies who undertake specific actions, namely Change ofCEO, Change of Chair, Retrenchment and/or Change of Ownership, will perform betterthan those who do not take these actions. The specific hypotheses that flow from theseassertions are presented below:


Hypothesis 5A. Turnaround performance will be greater for both Australian andSingaporean companies when CEO change occurs.

Hypothesis 5B. Turnaround performance will be greater for both Australian andSingaporean companies when Chairman change occurs.

Hypothesis 5C. Turnaround performance will be greater for both Australian andSingaporean companies when retrenchment occurs.

Hypothesis 5D. Turnaround performance will be greater for both Australian andSingaporean companies when ownership change occurs.

Research method

Sample selection

Previous studies (e.g. Robbins and Pearce II, 1992; Bruton, Oviatt and White, 1994; Barkerand Patterson, 1996; Barker and Duhaime, 1997; Castrogiovanni and Bruton, 2000; Bruton,Ahlstrom and Wan, 2003) adopted various criteria in identifying declining firms such asa return lower than the risk free rate of return and one year of net loss during the se-lected decline period (e.g. Barker and Patterson, 1996; Barker and Duhaime, 1997), or asimultaneous decline in multiple performance indicators (e.g. Robbins and Pearce II, 1992;Bruton, Oviatt and White, 1994; Castrogiovanni and Bruton, 2000). This study drew onthe sample selection method similar to that used by Bruton, Oviatt and White (1994) andCastrogiovanni and Bruton (2000) to generate the research sample. Their sample includedfinancially distressed firms in US that had been acquired during the periods from 1979 to1987. They defined financially distressed firms as those that had experienced two consec-utive years of decline in both net income and return on investment (ROI). We applied thiscriterion of financially distressed firms to our sample selection. The use of multiple per-formance indicators was considered to be a satisfactory criterion for identifying distressedfirms (e.g. Robbins and Pearce II, 1992; Bruton, Oviatt and White, 1994; Castrogiovanniand Bruton, 2000). In particular, Bruton, Oviatt and White (1994) argued that the criteria ofsimultaneous declines in net income and return on investment would be sufficient to ensurevalidity. Hence, we did not specifically require our sample to yield a return lower than therisk free rate of return, or to experience a year of net loss. In addition, our focus was onthe Asian crisis as the primary cause of decline rather than identifying failed firms or firmswith long-term financial problems. This differentiates our sample from that used by Bruton,Ahlstrom and Wan (2003), who focused on the period 1979 to 1998.

This study does not specifically examine aspects of firm acquisitions. In addition, ourinitial screening identified that few companies in Singapore had changed ownership. Assuch we did not exclude non-acquired firms in our sample. Bruton, Ahlstrom and Wan(2003) excluded from their sample 11 firms who had ‘unusual financial patterns’ during therecovery period, arguing this had occurred because of either acquisition or mergers, andtherefore the firms were outliers. This exclusion is perfectly justifiable given the variables


being investigated by Bruton Ahlstrom and Wan (2003). However, as one of the itemsinvestigated in our research is ownership change, it is not appropriate to use this criteria toexclude firms from our sample.

The Osiris research database was used to identify firms in Australia and Singapore thathad information on net income and return on equity (ROE) available between 1996 and 1999.ROE is defined in the Osiris database as net income before tax divided by shareholders’equity. It is the only consistent form of rate of return information computed across all firmsin Osiris, regardless of the industry types. The use of other forms of rate of return wouldexclude firms in certain types of industry and limit the selection of sample firms. As ourstudy focuses on declining return rather than comparing the rate of return to benchmark, bothROE and ROI produce a similar declining trend and therefore have no important differencefor the purpose of sample selection. In addition, the use of ROE provides the advantage offocusing the firm’s accountability to investors under an uncertain economic environment.Thirty firms from each country were selected using the random sampling method. These60 firms were selected after eliminating those firms on which data on turnaround actionvariables was not available. The sample size for this study compared favourably to otherrecent studies using a similar research method (e.g. 32 firms in Barker III and Mone’s1994 study; 46 firms in Castrogiovanni and Bruton’s 2000 study; and 90 firms across threecountries in Bruton, Ahlstrom and Wan’s 2003 study).

The average performance of the sample before and after the Asian crisis from 1993 to2001 is shown in figure 1. On average, the sample firms in both countries experienced thehighest level of financial performance in 1996 and a sharp decline afterwards, indicatingthe impact of the crisis.

Performance variable

This study examines turnaround performance during and after the Asian crisis. Previousstudies often used return on investment, profit or loss, or net income as measure of perfor-mance (Barker III and Mone, 1994; Chowdhury and Lang, 1996; Harker, 1996; Balgobinand Pandit, 2001). Other studies used market share or bankruptcy prediction rate as indi-cators of performance (Vaz, 1996; Muller and Barker III, 1997; Barker III and Duhaime,1997). Table 1 provides a summary of various definitions and measurements of performancein selected literature. The use of accounting measures alone was considered inadequate tocapture the ability of the firm to turnaround. There are other non-financial factors that mightinfluence the success or decline of business such as management actions, competitivenessand stakeholders’ interests (Barker III and Duhaime, 1997; Pandit, 2000). Pandit (2000,p. 37) therefore suggested the use of expert opinion as a supplement to financial measuresand recommended that:

A triangulated approach that looks for consensus among accounting-based indicators andexpert opinion seems to be the best way forward.

In addition, given the timing of the Asian crisis, there was only sufficient financial data toallow for the determination of two years of decline. Financial data following the decline was


Table 1. Definition and measurement of performance.

Castrogiovanni and Bruton (2000) “Because a primary business goal is the maximization of owner wealth,performance was defined as benefits accruing to the acquiring parentfirm”.

Performance measure: panel evaluation, 7 point scale (unsuccessful tovery successful), performance was estimated as the mean value ofthe panel’s rating.

Bruton, Ahlstrom and Wan (2001) Performance not explicitly defined.Implied in the term “recognition of the decline”. But what is ‘decline’

is not defined. Probably reflected in the equity market or when “thefirm can no longer pay its debts—a serious stage of decline”.

Bruton, Ahlstrom and Wan (2003) ROI adjusted by the risk-free rate of return.Change in performance is measured by the average adjusted ROI of the

3-year recovery period subtracting the average adjusted ROI of the3-year decline period.

Balgobin and Pandit (2001) Income declines, rate of profit margin.Causes of declining performance: declining demand, increase in

competition, increase in input costs, poor management, inadequatefinancial control, high cost structure.

Mueller and Barker III (1997) ROABankruptcy prediction Z-score: 1.2 (working capital/total assets) + 1.4

(retained earnings/TA) + 3.3 (earnings before interest and taxes / TA)+ 0.6 (market value of equity/book value of liab) +1.0 (sales/TA)

Barker III and Mone (1994) ROI : Income before extraordinary items, divided by total investedcapital

Barker III and Duhaime (1997) 3 years of return on invested capital (net income/total investment)below the risk free rate of return and 3 years below. Risk free rate:return rate for US Treasury notes.

Altman’s bankruptcy prediction Z-score of less than 3 for 1 year.

Chowdhury and Lang (1996) 2 years pre-tax ROI below 10%ROI = Pre-tax net income / (shareholders’ equity + L-T debt +

Noncurrent capital leases)

Bruton and Rubanik (1997) Performance not explicitly defined.Indications of decline in performance: financial crisis, decline in

military spending, military contracts and revenue dropped,production dropped.

Harker (1996) 2 years decline in contribution to profit/loss in absolute terms andrelative to industry (sales) performance, followed by 2 years increase.

Vaz (1996) Serviceability, profitability, market share

Umbreit (1996) Debt level, operating losses, room occupancy rate

Pandit (2000) Profitability (multiple accounting-based measures)CompetitivenessMarket capitalizationConsensus among stakeholders e.g. investors, board members,

managersFirm’s executives confirmed that a turnaround had occurred


not fully available for all selected firms to determine whether an upturn had been achieved.Therefore, it is impractical for this study to rely solely on financial measures.

The approach adopted by Bruton, Oviatt and White (1994) and Castrogiovanni and Bruton(2000) was consistent with Pandit’s (2000) recommendation. Hence, the measure for busi-ness performance for this study was developed by replicating Castrogiovanni and Bruton’s(2000) method. Their studies used a panel of academic evaluators to assess the performanceof acquired firms on the basis of information published by industry experts, stock analystsand business writers. While this can be a subjective measure, it takes into considerationthe influence of the business environment from various perspectives. Consistent with theapproach, this study employed a panel of three academic evaluators to assess the businessperformance of the selected firms. All evaluators had relevant consultancy or managementexperience in firms operating in the Asia-Pacific region.

The method of evaluation is based on media comments generated from the Factivadatabase which provides a collection of news releases published in various sources in-cluding top business journals and popular newspapers in countries such as U.S.A., U.K.,Australia and Singapore from the years 1999 to 2001 (the number of articles being reviewedranged from 5 to 90 for each firm). Bruton, Oviatt and White (1994:978) justified the useof press releases written by business experts and analysts by suggesting that:

Since people pay for the outputs of this competitive group of writers and sometimesinvest on the basis of their advice, the risk to the writers of ruining their reputations bysloppy reporting and analysis would ensure that the articles provided the most accuratepublicly available information.

In assessing the level of performance, our panel was asked to read the media commentsto determine the extent the firm was perceived as achieving good performance. The panelalso examined the available financial data (including the trend of the return on investmentsand net income) for the post-decline years to assess whether the perception of performancebased on media comment was consistent with the financial results. The panel then ratedthe performance of the firm on a seven-point scale ranging from 1 (very unsuccessful)to 7 (very successful). The final score is the mean score of the three panel ratings. Thisapproach increases the validity of our measure and is consistent with Pandit’s (2000:37)idea of attaining a ‘consensus among accounting-based indicators and expert opinion’.

Turnaround action variables

The turnaround action variables are change of ownership, change of chairman, replacementof CEO and retrenchment. In this study, a firm is considered to experience a change of own-ership if there is a change of major shareholder who has significant influence or controllinginterests in the firm. Various factors may indicate significant influence or control such asthe capacity to affect or dominate the operation of the firm. In order to measure changeof ownership objectively, significant influence or controlling interest is operationalised asholding 20 percent or more of the firm’s voting shares based on the recommendation by theAustralian accounting profession (AASB 1016, 1998).


Retrenchment has been considered a common and necessary step in turnaround. Variousstudies defined retrenchment as a response by a firm to increase efficiency by either reducingcosts and assets, or rearranging and restructuring parts of the assets, as indicated by actionssuch as reducing financing costs, reducing current assets and current liabilities, sale of assetsand improved employee productivity (Barker III and Mone, 1994; Pearce and Robbins,1994; Chowdhury and Lang, 1996; Castrogiovanni and Bruton, 2000). In addition, Brutonand Ahlstrom (2001) suggested the firm’s ability to retrench was reflected by its ability tomanage accounts receivable and to manage banking relationships which, if not managedproperly, might lead to forced repayment of debts by lenders. This study seeks to identifywhether retrenchment has occurred by reference to these indicators.

Following Castrogiovanni and Bruton’s (2000) method, another panel of academic raterswas used to assess the information for the turnaround action variables. Change of ownership,chairman and CEO can be readily identified from the information contained in Factiva andConnect4 databases. However, identification of retrenchment requires the judgement of theevaluators.

Following Castrogiovanni and Bruton’s (2000) scoring method, the measures for thesevariables were dichotomous codes, with 0 representing ‘no’ (the event has not occurred)and 1 representing ‘yes’ (the firm has undertaken such actions). The raters formed theirjudgements on whether change of ownership, change of chairman, replacement of CEOand retrenchment occurred by referring to the information provided in the firm’s financialstatements as well as relevant press releases during the periods from 1996 to 1999.

In order to analyse how quickly the firm experienced changes in ownership, CEO, chair-man and retrenchment, a four-point scale was used to measure the speed of change. Basedon the assumption that Asian crisis ‘event’ was the primary trigger of decline, changes thatoccurred in 1997 are considered to be faster responses by firms than those occurring in lateryears. Hence, scores ranging from 4 to 1 were assigned to changes initially occurring in1997, 1998, 1999 or no change over the period respectively.

This study also examined degree of decline as a control variable similar to that suggestedby Castrogiovanni and Bruton (2000). They suggested that “distressed firms that had thegreatest decline might subsequently tend to experience the greatest turnaround” (2000:29).Degree of decline was measured by the percentage change in net income of the selectedfirms over the two-year period of performance decline. As this study did not examine firmacquisition, we used the period of Asian crisis as our trigger variable.

Results

Analysis of whether Australian or Singaporean companies would be more likely to changewas made by examining the trend of changes for the period concerned (Hypotheses 1A, 2A,3A and 4A). On the other hand, the speed of change was analysed by using independentsample t-tests (Hypotheses 1B, 2B, 3B and 4B). The results of two-country comparison onchange of CEO, chairman, ownership and retrenchment are shown in Tables 2 and 3. Theanalysis in Table 3 was based on a 5% level of significance.

Hypotheses 1A and 1B compared the change of CEO between the two countries. Noimportant difference was observed from Table 2. In addition, there was no significant


Table 2. The trend of changes from 1997 to 1999.

Number of firms experiencing the changes

Australia Singapore

1997 1998 1999 Over 3-year 1997 1998 1999 Over 3-year

CEO change 4 7 4 12 1 8 4 13

Chairman change 4 6 8 15 2 2 4 8

Retrenchment 14 16 17 21 5 9 13 19

Ownership change 4 9 1 13 1 0 2 3

Sample size = 30 companies for each country.

Table 3. Results of T -test on two-country comparison—Speed of change.

Australia Singapore

M SD M SD P-value

CEO change 1.87 1.17 1.77 0.97 0.720

Chairman change 1.93 1.11 1.47 0.90 0.079

Retrenchment 2.80 1.35 2.20 1.13 0.067

Ownership change 2.00 1.20 1.17 0.59 0.001∗

∗Statistically significant at the 0.001 level.

difference in the speed of change of CEO between the two countries. There was no indicationthat Australian companies will be more likely to change CEO and at a faster rate thanSingaporean companies. Similarly, as predicted in Hypotheses 2A and 2B respectively,there was no difference in the likelihood of change of the Chair and no significant differencein the speed of change of chairman between the two countries.

Hypotheses 3A and 3B tested the likelihood that retrenchment would occur in Australianand Singaporean companies and whether retrenchment would be faster for Australian com-panies than Singaporean companies. Compared to change of CEO and chairman, there wasa larger proportion of selected companies which undertook retrenchment in both coun-tries. However, the results did not indicate that Australian companies were more likely toretrench than Singaporean companies. Although it appeared that more Australian compa-nies retrenched earlier (see 1997 and 1998 in Table 2) than Singaporean companies, nosignificant difference was found in the speed of retrenchment between the two countries.

Hypotheses 4A and 4B compared the change of ownership between the two countries.The results showed that about 43 percent of the selected Australian companies and 10percent of the Singaporean companies changed ownership. Highlighted was that Australiancompanies were more likely to change ownership than Singaporean companies. A significantdifference was also found in the speed of change of ownership between the two countries.As predicted the results suggested that ownership change seemed to be a more commonpractice for Australian companies than Singaporean companies.


Table 4. Regression results—Factors influencing performance.

Australia Singapore

t-value p-value t-value p-value

CEO change −1.931 0.065 −0.391 0.699

Chairman change 1.243 0.226 1.333 0.195

Retrenchment 1.480 0.152 −0.175 0.862

Ownership change −2.142 0.043 1.244 0.225

Rate of decline −1.896 0.070 −0.616 0.543

Australia: R Square = 0.394, Adjusted R Square = 0.268.Singapore: R Square = 0.040, Adjusted R Square = −0.040.

Hypotheses 5A, 5B, 5C and 5D examined whether these turnaround actions had anyimpact on the performance of the companies in both countries. Multiple regression analysiswas used to test the hypotheses. Since the performance variable (dependent variable) wasan ordinal measure and the rate of decline variable (control variable) was a continuousvariable, the use of multiple regression was considered appropriate. The turnaround actionvariables were estimated using dichotomous measures of 0 and 1 to test whether the oc-currence of such actions contributed to improved performance. The results are shown inTable 4.

No significant relationship between performance and the four turnaround action variableswas found at a 5% significant level for both countries. As such, hypotheses 5A, 5B, 5C and5D were not supported. Although analysis for ownership change in Australia was significant,the negative relationship between ownership change and performance did not support theexpectation that ownership change would contribute to better performance.

As no significant results were found, further analysis was made to address the question ofwhether early adoption of the turnaround actions had an impact on performance. Additionaltests were conducted using the same four-point scale to measure the turnaround actionvariables. This took into consideration the effect of the speed of such turnaround action onperformance. Similar regression results were found for both countries.

Another test was conducted to analyse whether the degree of change, in addition to thespeed of change, affected performance. The turnaround action variables were measured byusing a seven-point scale (ranging from “1” if the initial change and the only change weremade in 1999, to “7” if changes were made in every year from 1997 to 1999). Again, nosignificant results were found in both countries, indicating that neither the speed nor degreeof change might lead to faster turnaround in either country.

Discussion

Our first group of hypotheses dealt with differences in likelihood of particular turnaroundactions, and the speed at which they occur in the two countries. We predicted that based onsimilarities in governance transparency, there would be no difference in either likelihoodor speed of action, in relation to change of CEO, change of Chair, or retrenchment. Our


findings support these hypotheses. Further, we suggested while there would be no differencein likelihood of ownership change, because of the greater level of government relatedbusinesses in Singapore, the speed of ownership change would be slower in that countrythan in Australia. These hypotheses were also supported.

Bruton, Ahlstrom and Wan (2001) suggested replacement of CEO did not frequentlyhappen in Asian countries due to the close relationship between the manager and the owner,who are often within the same family network. Asian companies are reluctant to changeCEO unless the firm has declined in a way that no longer has the support of the lenders.Bruton, Ahlstrom and Wan (2003) also maintain that the role of the owner-manager makestop management shift much more difficult to accomplish in ethnic Chinese East Asianfirms. While this explanation may still be applicable to the Singaporean companies, it is notsufficient to explain the similar results found in both Australia and Singapore. An alternateexplanation might be that as the two countries had similar levels of CEO change despitepredictions of cultural difference, this could mean that in addition to formal institutionalforces such as regulation converging, informal forces such as culture and business ideologyare also on a continuum of reduced difference. It may be that the Singapore setting is unique,and findings are not transferable to other East Asian contexts.

Only 40% of selected companies in total changed CEO in the three-year period. Similarnumbers changed their chair. This would indicate that the change in the top managementteam was not seen as important. This is not consistent with the view presented in the bulkof the existing Western literature. It could, however, reflect the attribution of blame forpoor performance on external factors outside the control of the company, which would beconsistent with conclusions of Barker III and Barr (2002).

There was no difference in the likelihood or speed of retrenchment. Again, this findingis not consistent with the consensus view presented in the research of Bruton, Ahlstromand Wan (2001). They attributed this to cultural and transparency factors, and identified adissenting view that retrenchment could occur if these issues were addressed. The higherlevels of transparency in the Singaporean setting, coupled with the policy commitment tocreating a business environment attractive to foreign investors, may explain why the barriersto retrenchment do not appear as strong in Singapore as they are elsewhere in East Asia.

Our finding on ownership change is consistent with our proposition that higher levels ofgovernment ownership reduce the pressure for change, which in turn reduces speed of changein Singapore. The greater likelihood of change of ownership in Australia than Singaporeis consistent with our extrapolation of Bruton, Ahltrom and Wan’s (2001) research. Weattribute this to the greater level of government involvement in the private sector, throughcompany equity ownership, in Singapore. However, given that there was no difference ineither our measure of change of CEO or change of chairman, for which ownership changeis seen as a catalyst, governance transparency is evident.

The second group of hypotheses addressed the debate in the literature regarding thecontribution of CEO change, change of Chair, retrenchment and ownership change to theperformance of companies. This debate centres on whether these tactical, short term actionsare necessary, or if a strategic long term focus is the main contributor to company turnaround.In our findings, there was no difference identified between companies which took any ofthe four actions and their turnaround performance.


Our findings are consistent with Barker and Mone’s (1994) and Castrogiovanni andBruton’s (2000) studies, which indicated that there was no empirical support for retrench-ment leading to improved performance. In fact the t-value and the p-value scores suggestedthat retrenchment has a lower explanatory power than other turnaround action variablesfor both Australian and Singaporean companies. This contrasts with Bruton, Ahlstrom andWan’s (2003:533) study where “certain retrenchment activities may play a significant role inthe turnaround effort”. The reasons for these differences could be explained by the differentnature of our measures of retrenchment. Bruton, Ahlstrom and Wan (2003) used an assetreduction based measure, while in our research a broader range of factors, including ‘assetdivestment and cost reduction, often by downsizing’, were assessed by an expert group toidentify the occurrence of retrenchment. While this may introduce a level of subjectivity tothe assessment, it does enable a more comprehensive view of retrenchment activities to betaken into account. It may be that different retrenchment aspects lead to different results.

The insignificant relationship between change of CEO and performance, and change ofchairman and performance, suggested that replacement of top management did not seemto be an important strategy to turnaround in both Australia and Singapore. Consistent withBruton, Ahlstrom and Wan’s (2003) study, but contrary to Barker III and Duhaime’s (1997)findings, the results of this study provide no supporting evidence for replacement of CEOand chairman to be a tactical step to turnaround in Australian and Singaporean context. Thiswould be expected given Barker III and Barr’s (2002) findings that change of leadership ismore likely when the decline is ascribed to internal reasons, or for external reasons that couldhave been controlled. The Asian crisis did not fit into either of these categories. Perhaps,this would support the argument of Barker III and Barr (2002) that it is the perception ofmanagement as to what change is needed.

Conclusion

Our study found, except for the aspect of ownership change, firstly, there was no significantdifference between Australian and Singaporean companies, in the likelihood of, or speedof, change of the chief executive officer. Secondly, there was no significant difference in thelikelihood of, or speed of, change of chairman between the two countries. Finally, there wasno significant difference in the likelihood, or speed of, commencement of retrenchment. Inaddition, we found that retrenchment, change of CEO, change of Chairman and change ofownership did not contribute to differences in turnaround performance in either Singaporeor Australia. This indicates to us that governance transparency issues, rather than culturalissues, drive these behaviours. It reflects the possibility that enhancing the transparencyof a country’s political, economic and business environment might be important for EastAsian countries. This is consistent with Bruton, Ahlstrom and Wan’s (2003) argument thatstabilizing a country’s legal environment and business transparency “would help improvethe ability to encourage turnaround” (2003:535).

Alternatively, the similarity between the two countries could be explained by a transitionof both formal and informal institutional forces in Singapore to those which commonlyhistorically existed in the West. This explanation may be applicable to Singapore as ithas overtly implemented a policy aimed at engineering its business culture to be more


attractive to foreign investors. However, this does not necessarily mean that reform ofthe institutional environment in other countries in East Asia, will lead to similar typesof management decision behaviours being evident. We argue that our findings, where theydiffer from previous research in East Asia, are based on the unique policy actions undertakenin Singapore, which in turn has led to the development of an institutional environment thatis unique in East Asia. Our differences from the empirical work undertaken by Bruton,Ahlstrom and Wan (2003) in this regard could be explained by the different time frames forwhich data was collected. Our data deals with the contemporary and relatively short periodsince the Asia Crisis event. Bruton, Ahlstrom and Wan’s (2003) study, by contrast, coversthe historical period 1979 to 1998. If convergence of formal and informal institutions is aprocess, Bruton, Ahlstrom and Wan (2003) may be reflecting the historical rather than thecurrent institutional environment.

Several avenues of further research can be drawn from our findings. Firstly, our studyonly focuses on two countries, Australia and Singapore. Further investigation of countrieswith differing levels of governance transparency is necessary to determine if this factor,rather than culture, is the more important driving force for turnaround decisions in otherSouth-East Asian countries. Secondly, given the likelihood of institutional transition, furtherresearch is necessary to quantify the contribution made by Singapore’s informal institutionalforces, and those in other transitioning countries, to quantify the impact of these forces,and the effectiveness of such policies in different societal settings. Thirdly, competitiveevidence regarding the role of retrenchment to the success of company turnaround foundin our study and in Bruton, Ahlstrom and Wan’s (2003) study suggests further researchinto different time frames would be useful to gain deeper understanding of the effect of theretrenchment decision under different circumstances. Finally, Bruton, Ahlstrom and Wan(2003) acknowledge that further research is needed on the impact of the owner-manager onturnaround of ethnic Chinese-managed firms. The possibility that the choice of turnaroundactions could be affected by the level of government involvement in the private sector, orthe extent of owner-manager domination, suggests that more extensive studies investigatingthe nature of the ownership in particular companies is necessary. We agree that this is animportant area for further research. In addition, the changed investment environment thathas followed the Asia crisis, the emergence of bilateral free trade and investment agreementsbetween, for example, Singapore and Australia, and the growth of the new class of self-selecting expatriate managers and professionals at senior levels in Asian multinationalcorporations, may impact upon the nature of the owner manager relationship in overseasChinese companies. This too warrants further research.

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an exploratory study of company turnaround in australia and singapore following the asia crisis

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