Investigation of the Effect of Short-Term Turnaround Strategies on the Survival of Publicly Listed Small and Medium Enterprises (SMEs)

Many studies conducted on large enterprises report on a range of turnaround strategies that affect corporate recovery and firms’ survival. Four specific strategies that are frequently mentioned in the literature pertaining to large enterprises are CEO change, retrenchment, recovery response and financial restructuring. However, fewer studies have been conducted to study turnaround in publicly listed Small and Medium Sized Enterprises (SMEs). Moreover, as a prompt response to declining performance, the existing corporate turnaround management literature lacks evidence for the effect of turnaround strategies on the success of turnaround attempts in listed SMEs during a short period. The study also investigates whether corporate turnaround has a relatively higher level of success in listed SMEs facing declining performance if it were attempted earlier in the firms’ life cycle, prior to the point that businesses face net loss. To address the mentioned gaps in the corporate turnaround management literature, a two-part analysis is employed. In the first part, utilizing panel data for 15 years (2000- 2014), this study investigates the short-term effect of the three most commonly reported turnaround strategies on the survival of publicly listed SMEs, while firms encounter net loss. To achieve this goal, the study makes use of existing data on 521 publicly listed SMEs in North America region from the Osiris Database in order to test the hypotheses that turnaround strategies significantly affect survival of the listed SMEs, while companies encounter net loss for a protracted period. Accordingly, a binary logistic panel model is employed to determine the probability of successful turnaround for declined companies that faced net loss.