Characteristics of firms eligible to go into “Extraordinary Administration” in Italy

Large financially distressed firms are admitted to Extraordinary Administration (EA) in order to preserve corporate assets, through the continuation or reconversion of entrepreneurial activities pursuant to the Legislative Decree 270/99. One or three judicial commissioners appointed by the Minister of Industry are engaged to manage the company admitted to EA. However, not all financially distressed firms are eligible to go into EA. First, firms are admitted to the procedure if there is a prospect of preserving the business as a going concern. Second, admission to the EA is restricted to large and highly leveraged firms. In more detail, two quantitative limits are required: 1) no less than two hundred employees in the last financial year; 2) debts not less than two-thirds both of revenues and of total assets in the last financial year. The present study examines the scope of the admission requirements 1) and 2) by analysing firm characteristics that differentiate companies eligible to go into EA from those that are not admitted.