The Influence of Financial Distress on Ownership Structure: Empirical Study for the Republic of Serbia

The main objective of our research is to examine the effects of financial distress on ownership structure and to elaborate on the factors that influence change of ownership in companies that have adopted a reorganisation plan in the Republic of Serbia. Of the 63 sample companies reorganised in bankruptcy proceedings between 2009 and 2015, the ownership structure remained unchanged in 49 companies, while in 35, the existing owners or their family members remained in charge of key management positions. Using binary logistic regression, we observed that two factors influenced the change in ownership structure: the length of time it takes to resolve the insolvency process and whether the owners were involved in the running of the distressed company before it filed for bankruptcy. The obtained results indicate that corporate governance mechanisms in distressed Serbian companies are not efficient.