The Role of Information in Assessing the Risk of Conducting Bankruptcy Proceedings

Michał Baran; Kinga Bauer

doi:10.3390/risks9040064

The Role of Information in Assessing the Risk of Conducting Bankruptcy Proceedings

Baran, Michał;Bauer, Kinga 2021-04-01 00:00:00 risks Article The Role of Information in Assessing the Risk of Conducting Bankruptcy Proceedings 1 , 2 Michał Baran * and Kinga Bauer Institute of Economics, Finance and Management, Faculty of Management and Social Communication, Jagiellonian University, ul. Łojasiewicza 4, Room 2.378, 30-348 Kraków, Poland Department of Accounting, College of Management and Quality Sciences, Institute of Management, Cracow University of Economics, ul. Rakowicka 27, 31-510 Kraków, Poland; kinga.bauer@uek.krakow.pl * Correspondence: michal.baran@uj.edu.pl Abstract: Modern management means making managerial decisions in many situations—including the administrative ordering of matters of a bankrupt enterprise. The situation in which the court approves the opening of bankruptcy proceedings is strictly regulated by law. This does not mean, however, that such a decision is made under conditions of certainty as to its consequences. The risk of making a wrong decision has signiﬁcant consequences for everyone who is interested in it (the bankrupt company, its partners, employees, banks, the tax ofﬁce). The purpose of this article is to explain the importance and signiﬁcance of the various types of information that are used to reliably assess the value of a failing enterprise’s assets. The information of individual types is analyzed in the decision-making process which leads to the right decision on whether to start bankruptcy proceedings. Therefore, in the theoretical part, the authors prepare a list of types of information used in the mentioned process. Then the authors present the results of a survey (103 specialists in the ﬁeld of bankruptcy), which allows to assess the real meaning of information of individual types. The main contribution for which the present paper is responsible is the description of the Citation: Baran, Michał, and Kinga veriﬁed tool which functioned in the form of the survey that was applied in the study and the result Bauer. 2021. The Role of Information arising from conducting it. This survey was used to achieve the main objective that was focused in Assessing the Risk of Conducting Bankruptcy Proceedings. Risks 9: 64. on constructing the hierarchy of signiﬁcance of different types of information relating to the risk of https://doi.org/10.3390/risks conducting bankruptcy proceedings. The main ﬁndings show that in general insolvency specialists prioritize the information (ﬁnancial and also not ﬁnancial) not originating from ﬁnancial reporting. Academic Editor: Keywords: information management; risk management; bankruptcy proceedings; sustainability Zbysław Dobrowolski Received: 28 February 2021 Accepted: 29 March 2021 1. Introduction Published: 1 April 2021 Contemporary management covers various areas that are a manifestation of organized human activity. In addition to issues related strictly to commercial activity, an important Publisher’s Note: MDPI stays neutral subject of modern management interest is improving the rationality of decision-making with regard to jurisdictional claims in processes that shape the framework of such activity. The processes in question concentrate published maps and institutional afﬁl- on the processing of large collections of varied information and are key to generating value. iations. This sphere is also strongly related to investing in solutions to increase the security of information resources (Deane et al. 2019) and the credibility and reliability of the processes of their processing (Goldstein et al. 2011) because, as it turns out, such activities have a signiﬁcant impact on the valuation of traded resources. Research shows that the difﬁcult Copyright: © 2021 by the authors. market situation (or its improvement) in the case of large corporations determines the Licensee MDPI, Basel, Switzerland. valuation of the entire industry and the goods it uses (Jayanti and Jayanti 2011). One of the This article is an open access article speciﬁc areas that is important for shaping the rules of cooperation between commercial distributed under the terms and entities and ﬁnding what is the level of risk such entities are ready to accept in the event of conditions of the Creative Commons starting possible cooperation with other organizations is bankruptcy proceedings (Lukason Attribution (CC BY) license (https:// and Camacho-Miñano 2019). The commonly observed fairness and professionalism of creativecommons.org/licenses/by/ decisions that can potentially be expected when a court is considering bankruptcy is 4.0/). Risks 2021, 9, 64. https://doi.org/10.3390/risks9040064 https://www.mdpi.com/journal/risks Risks 2021, 9, 64 2 of 18 key to assessing the sense of initiating such a procedure. Nowadays, where the risk of doing business has increased signiﬁcantly as a result of the pandemic, the problem is becoming even more acute. Therefore, without the effective possibility of taking advantage of sanctions in the form of bankruptcy proceedings, the company’s contracting party will be exposed to additional risk while deciding to start cooperation (and sometimes will resign from a very attractive but risky contract). Contrary to the appearances, this case is much more complicated than it may initially appear to an outside observer (Horváthová and Mokrišová 2018). An application for a declaration of insolvency of an enterprise is ﬁled in court when there is a well-founded fear that the debtor ’s assets are too small to pay off most of his liabilities. This often happens too late even to pay off a small part of them. Thus, by deﬁnition, we are dealing with a deﬁcit in the value of assets. The assets must, however, be large enough for the accumulated resources to at least cover the administrative costs of the bankruptcy proceedings itself (while the surplus may be divided, in accordance with the law, between creditors). There- fore, unacceptable is the situation in which there are unexpectedly insufﬁcient funds for actions provided for under the procedure during the ongoing bankruptcy proceedings. The decision-maker (in this case a judge of the commercial court) who decides whether or not to initiate bankruptcy proceedings bears a very large responsibility in these circumstances. The difﬁculty of the situation results from the limited access to the necessary information, which, in addition, to a large extent is only a forecast or accounting data, the value of which often signiﬁcantly differs from the selling value of the debtor ’s assets (Maczy ˛ nska ´ 2009; Bauer 2014; Bauer 2015). Estimating the value of assets of a bankrupt organization can be carried out while using many different methods, however, the ﬁnal veriﬁcation of the accuracy of the assumptions that are made will take place on the free market when the moment of actual sale of the entire enterprise or its individual elements (which make up the value of the bankruptcy estate) takes place. The moment of the valuation may be signiﬁcantly distant in time from the sale of the asset. According to the Doing Business report, the average duration of bankruptcy proceedings in Poland is approx. 3 years (World Bank Group 2017, p. 232). In addition, the price that will be obtained will be the result of a combination of various current conditions (such as the temporary ﬁnancial capacity of a potential buyer, a change in the value of a bankrupt enterprise as a result of changes in demand for its products or services, or events such as further development of a pandemic) and as a result this price may signiﬁcantly differ from the expectations (Budzanowska-Drzewiecka et al. 2016). It may happen that some elements will have a higher value when they are combined into a whole (synergy effect), while when some component is missing, the value of the remaining set will dramatically decrease (this is the situation in the case of technological lines built from a set of devices that can also work separately). Taking into consideration the fact that the main contribution of the paper is the description of the veriﬁed tool in a form of the applied survey which was used to construct the hierarchy of signiﬁcance of different types of information relating to the risk of conducting bankruptcy proceedings, the main ﬁndings show that insolvency specialists prioritize the information (ﬁnancial and also not ﬁnancial) not originating from ﬁnancial reporting. In general, the launch of bankruptcy proceedings can also be viewed in terms of the sustainable development of the system of cooperating entities. The weakest entities that manage assets ineffectively are eliminated and the assets themselves go to new owners who are able to use them better. However, this will only happen if the entire process is professionally carried out and based on a reliable and realistic valuation. 2. Background Two basic issues should be clariﬁed when considering the role of information in assessing the risk of conducting bankruptcy proceedings. The ﬁrst is the answer to the question about the nature of information, i.e., its features, which are of key importance from the perspective of the possibility of using it in a reliable process of assessing the value of the Risks 2021, 9, 64 3 of 18 assets of a bankrupt organization. It is the properties characterizing the information itself that determine whether the right decision will be made owing to its correct interpretation (Dziekonski ´ 2017). The second question concerns the types of information sources that are used in the analyzed assessment procedure. 2.1. Features of Information Inﬂuencing the Risk Assessment in the Process of Property Valuation Information is an extremely difﬁcult concept to deﬁne, which results in the fact that there are many proposals to describe it. It can be said that the situational approach is dominant, in which the perspective of the needs in which information is used determines the way of deﬁning information. Currently, however, there is a certain consensus that allows us to state that in the case of information we are dealing with some kind of intangible resource. This resource is created as a contractual (i.e., recorded according to a certain ﬁxed notation) reﬂection of some aspect of dynamic reality. Then, such a mapping is the basis for indicating the originally registered feature of reality. Therefore, we are dealing with a certain model of reality that to a greater or lesser extent corresponds to the needs and expectations of the subject performing its interpretation (Burgin 2019). The accuracy of the decision to start or resign from bankruptcy proceedings depends on the role of the infor- mation used on this occasion. This is determined by the circumstances, the scope of which results primarily from the answers to the following questions (Wolfengagen et al. 2019; Birchler and Bütler 2007; Barkova et al. 2017): Does the decision-maker potentially have access to information on phenomena, the description of which he will actually need? Will the information be up to date? Will the information faithfully reﬂect the assessed reality? Will the information be complete? Will the information be interpretable? Will the information be unambiguous? Does the form of recording information allow for its further analysis and use in the decision-making process? Can information be obtained with the means available to the decision maker? Does the information represent the required level of detail? Does the information come from a reliable source? Can the information be attributed to a speciﬁc source? Does the information detail the image of the analyzed reality or does it repeat what already possessed information contains? Does the information have elements that allow it to be identiﬁed and easily found in a larger set? Does the information help to improve the accuracy of the decisions made? Could the information have been manipulated or distorted by the inﬂuence of addi- tional factors, people or phenomena? Does the information properly highlight the key aspects of the characterized reality? As a result of providing an unsatisfactory answer to a certain subset of the above questions, which relate to one or several of the above circumstances, there appears dys- functional situation that leads, among others, to the following consequences (Czekaj 2012; Mindt 2017): Inability to ﬁnd the necessary information due to its excess; Inability to use information due to its incompleteness; Inability to use the information due to its lack of clarity; Inability to use information due to its internal contradiction; The inability to use the information because of the fact that the information is out of date. The above-mentioned consequences of the occurrence of unfavorable circumstances, which signiﬁcantly affect the effects of using information in the process of assessing the Risks 2021, 9, 64 4 of 18 risk of conducting bankruptcy proceedings, may ultimately lead to a wrong decision. The judge making such a decision must be able to assess the risk of making a mistake and effectively minimize it. In pursuing this goal, the judge analyzes various documents, which are usually burdened with various defects resulting from the occurrence of the above-mentioned circumstances and their consequences (Stanczyk ´ et al. 2020). Therefore, in the following part of the discussion, typical information that appears in the process of making a decision about whether to proceed to bankruptcy proceedings will be discussed and critically analyzed. 2.2. Typical Information Constituting Basis for Insolvency Proceedings Risk Assessment The needs of enterprises going bankrupt and their stakeholders in the ﬁeld of infor- mation and types of such information can be viewed from both scientiﬁc as well as legal standpoint. Both approaches are linked to the judicial practice of bankruptcy proceedings. The accepted basis for the study in this topic is the statement cited in the literature that one of the undisputed roles of a bankruptcy proceedings is the reduction of information asymmetry (see i.a. Smith and Strömberg 2005; Bauer 2018a, 2018b). Analyses concern- ing different legal solutions should be conducted with the use of economic knowledge (Stiglitz 2004, p. 9). Actions aiming at improved diagnosis of the problem of enterprise bankruptcy should serve inhibiting the spread of negative consequences of bankruptcy (Maczy ˛ nska ´ 2008), thus favoring not only the stakeholder of the bankrupt, but also the entire society, and even contribute to improved functioning of economies at an international scale, which is in general embodied by the idea of sustainable development. Scientiﬁc research emphasizes the role of ﬁnancial information in the assessment of an indebted enterprise. Special attention is assigned to the information that originates from ﬁnancial statements of the obligor (Wedzki ˛ 2015; Zorn et al. 2017). Various types of information are discussed in literature as signiﬁcant and even of priority for the conduct of a bankruptcy proceedings. Special rank is assigned to the information on the costs of bankruptcy proceedings and valuation of assets of the obligor. The reporting informa- tion, particularly referring to the going concern assumption is indicated as a signiﬁcant supplement of the decision process (Bauer and Hospodka 2020). Literature studies have shown that the information on the costs of bankruptcy pro- ceedings is of key signiﬁcance for the initiation and conduct of a judicial process (e.g., Altman and Hotchkiss 2006; Marsh 2010; Finch 2012; Morawska 2013; Bauer 2013; Prusak et al. 2019; Staszkiewicz and Morawska 2019; Bauer and Hospodka 2020). The signiﬁcance of the bankruptcy proceedings cost estimation stems from the fact that it constitutes high value as compared to the value of the bankrupt’s assets. It has been even ironically referred to as one has to be rich for court to announce bankruptcy (Marsh 2010). This is conﬁrmed by the empirical studies conducted in Poland showing that the cost of a bankruptcy proceed- ings comprise as much as 35% of the bankruptcy estate (Morawska 2013). Conﬁrmation of the role of their calculation is also the standpoint of bankruptcy specialists indicating that the information on the costs of bankruptcy proceedings is of key signiﬁcance for the bankruptcy process. Close to 83% respondents stated that this information is important (Bauer and Hospodka 2020). Another information mentioned in literature as necessary for a bankruptcy proceed- ings is the data on the value of the obligor ’s assets and the correct measurement of the value of assets of companies, for which there is a risk for the continuation of operation or bankruptcy (see i.a. Newton 2010; Altman and Hotchkiss 2006; Bauer 2014; Bauer 2015). Despite the justiﬁed concerns regarding the capacity of an entity to continue its operation, they pursue their business activity, and the users of ﬁnancial statements make business decisions (for example, entrepreneur make decisions on future business opportunities, business partners make decisions on continuing cooperation, courts issue basis for an- nouncing bankruptcy). The role of bankruptcy institution in the reduction of informational asymmetry is strictly related to the information on the assets of the obligor. This should be favored by legal regulations (Smith and Strömberg 2005), which aim at supporting honesty Risks 2021, 9, 64 5 of 18 and discipline in managing the ﬁnances of a bankrupt business (Wessels et al. 2009). From the viewpoint of the risk of bankruptcy process, the information on the valuation of obligor assets is important already at the preliminary stage of the proceedings. It is used as a comparative value for the estimated costs of bankruptcy proceedings. A problematic issue is to select the suitable valuation measure. In the case of judicial bankruptcy proceedings, two measures are used at the same time: book value and estimated commercial (liquidation) value of the assets. There are reservations as to the role of information originating from ﬁnancial statements, because the book value does not fully reﬂect the commercial value of the assets, and it can even markedly differ (Maczy ˛ nska ´ 2009; Bauer 2014; Bauer 2015). Estimated values are also not the perfect measure, because they are not free from the impact of the intention of the person making the estimations. The obligor may manipulate the estimations in order to obtain the expected beneﬁts, e.g. overestimate the estimated assets value in order to exhibit the capacity to cover costs of bankruptcy proceedings (Altman and Hotchkiss 2006). During a research concerning the signiﬁcance of the information on the book value of assets, Polish insolvency specialists have indicated it as important for the transparency of the bankruptcy process (Bauer and Hospodka 2020). Therefore, it appears advisable to use more than one measure of assets value in a bankruptcy process. Using the information concerning bookkeeping valuation requires the knowledge of the methods assumed. The information on the assumed or rejected going concern assumption is the priority information. Although the objective of bankruptcy proceedings is liquidation of the obligor ’s assets and settlement of claims of creditors to the greatest possible extent, the practice of bankruptcy proceedings shows that there are cases where entities while preparing a ﬁnancial statement for the purpose of commencing a bankruptcy proceedings prepare them with the going concern assumption (Górowski 2016, p. 244; Bauer 2016, p. 130). In practice, making the decision on assuming business continuation is not easy. In some cases, it requires the preparation of a multi-annual economic forecasts (Górowski and Kurek 2019, pp. 186–89). However, it is one of the pieces of information expected from the stakeholders of a company undergoing a bankruptcy process (Bauer and Hospodka 2020). The content of the information base for bankruptcy processes is regulated by the provisions of national law. Legal regulations in this ﬁeld are highly diverse. In many coun- tries, the laws oblige the debtor to submit information on the value of assets already upon initiating the bankruptcy proceedings, such as lists of estate assets and claims, sometimes ﬁnancial statements or preliminary valuation of its assets (Smith and Strömberg 2005). The approach of the USA has been indicated as the most detailed one in the ﬁeld of ﬁnancial information. US GAAP represents the most detailed approach to bankruptcy bookkeeping. Also the scientiﬁc studies concerning this topic are much more comprehensive than in other countries (e.g., Newton 2010; Haskin and Haskin 2012). Valuation in liquidation values is indicated in the USA as the correct approach to valuation in terms of bankruptcy. Apart from the information on assets, costs related to sale of assets, as well as the potential revenues and costs which will be booked in the period of judicial proceedings are also calculated (Bauer and Hospodka 2020). Legal regulations concerning the information required for submission in court at the preliminary stage of the proceedings should be considered as rather comprehensive. Apart from the identiﬁcation data of the obligor and their creditors, with the application for bankruptcy, the obligor is obliged to submit the current list of assets, with estimated valuation of their components, as well as a balance sheet prepared by the obligor for the purposes of the proceedings for a day within thirty days prior to the date of submitting the application (The Bankruptcy Law, article 23). In the context of this article, a conclusion arises that from the standpoint of a court, for the aptness of the decision made, both information on the balance sheet value as well as estimated value of the assets is required. Balance sheet further contains bookkeeping data concerning the values of individual liability groups. From the standpoint of a bankruptcy proceeding, the information on the value of the obligor ’s liabilities might be particularly signiﬁcant. Risks 2021, 9, 64 6 of 18 The information provided by the obligor are supplemented upon request of the court by the temporary court supervisor with the information on the ﬁnancial status of the obligor, type and value of their assets, and the expected bankruptcy proceedings costs (The Bankruptcy Law article 38 para. 3). Information on the estimated bankruptcy proceedings costs is a priority for the commencement of bankruptcy proceeding, because if their value is greater than the assets value it forms the basis for rejection of the application for bankruptcy (The Banktuptcy Law 2003, article 13, 38). Therefore, from the viewpoint of bankruptcy law, the correct estimation of bankruptcy proceedings costs and obligor assets value is of key signiﬁcance for restricting the risk of unjustiﬁed commencement of judicial proceedings due to low value of bankruptcy estate. In the context of the above scientiﬁc considerations, as well as analysis of legal regula- tions it has been assumed that information is the key factor favoring minimization of the risk of insolvency proceedings failure, understood as the incapability to cover at least the costs of bankruptcy proceedings. This task is covered by the reduction of the information asymmetry between the stakeholders having access to the complete documentation of the obligor and preparing information for court, and the key stakeholders making decisions in the bankruptcy process, i.e., the judges. 3. Method The empirical data collection process was conducted based on the survey studies, which were participated by 103 specialists in the ﬁeld of insolvency. Another group of respondents comprised of key decision-makers participating in the decision-making process on the commencement or resignation of bankruptcy proceedings. This group included commercial court judges, restructurization advisors, administrative receivers, and certiﬁed auditors. The research sample included: 29 judges conducting bankruptcy proceedings, 12 members of the Minister of Justice Council for the Amendment of Bankruptcy and Reorganisation Law, 96 people who have declared that they have practical experience in bankruptcy pro- ceedings conducted in 2013–2015; 62 of them have declared to also have practical experience in proceedings under the Bankruptcy law that went into effect in 2016. Fifteen respondents indicated double occupational afﬁliation. The sample group includes a large percentage of insolvency judges. According to the data of the Association of Restructuring and Bankruptcy Judges, there are twelve departments in Poland dealing exclusively with bankruptcy cases. There are a total of 87.8 job positions for judges in these departments. In addition, there are eighteen economic departments, which also deal with bankruptcy cases. However, there is no known number of judges who deal with bankruptcy proceedings in these departments. The sample group includes answers of almost 43% of all the members of the Justice Council for the Amendment of the Bankruptcy and Reorganisation Law. The council consists of 28 members (Ministry of Justice 2012). The population size of bankrupt entities, including the number of insolvency special- ists in Poland affects the restrictions concerning the possibility of conducting statistical analysis with division into subgroups of respondents representing speciﬁc professions. Furthermore, an additional issue linked to the distinction of individual respondent groups is the fact that a considerable majority of them declared more than 1 profession (e.g., a judge who is at the same time an academic employee for jurisprudence). Although the study was conducted in one country (in Poland), it has considerably more comprehensive scale than just national. In the era of globalization, the difﬁculties of individual enterprises are transferred between countries, therefore legal regulations in the ﬁeld of bankruptcy may have a considerably greater impact than within one country. Moreover, selection of Poland is valid because this is the country where requirements for documentation submitted at a court are relatively extensive. For example, in Czechia, Risks 2021, 9, 64 7 of 18 which has a similar history of changes after the change from centrally planned economy to market economy, the information base for insolvency processes does not contain any elements of ﬁnancial statement (more on the topic: Bauer and Hospodka 2021). Therefore, results of the presented analysis may constitute a reference point for other countries as well. The study included a series of issues from the ﬁeld of the course of bankruptcy pro- ceeding, however for the purpose of the titled considerations only the questions concerning the assessment of individual information types in the process of making decision on com- mencing bankruptcy proceedings. The empirical research carried out is part of a much broader research project regarding the informational role of accounting in restructuring and insolvency proceedings. The questionnaire contains 149 detailed questions. Three types of information (more on the topic: Bauer and Hospodka 2020) were used for the purpose of an earlier article (which was a starting point for the exploration of the investi- gated problematics) concerning the role of ﬁnancial information in ensuring information transparency of an insolvency proceedings. These questions concerned: The costs of bankruptcy proceedings, The going concern assumption adopted in the ﬁnancial statements, The book value of assets. In the present article, these three questions will be used in a set with ﬁve additional questions in a new context and objective, which is determination of the hierarchy of types of information indicated as signiﬁcant for ensuring informational transparency of a bankruptcy proceeding, and thus minimization of the risk of failure of its conduct. The term of informational transparency of a bankruptcy proceeding, found in publications devoted to the discussed problematics has been ﬁne-tuned as a result of literature study (e.g., Bushman and Smith 2003, p. 76; Bushman et al. 2004; Anctil et al. 2004; Turilli and Floridi 2009, p. 105) and it means the situation when: All stakeholders accept the decision regarding bankruptcy proceedings as a logical consequence of a conﬁdentiality by the court, Based on the information included in the information database of the process, stake- holders who have sufﬁcient economic knowledge are capable of assessing the ﬁnancial standing of the obligor on their own. Questions of the survey were closed, and the used scale of the possible answers had ﬁve levels, where 1 means completely irrelevant information and 5 means crucial information. “I don’t know” or “not applicable” was a possible answer to each question. “I don’t know” means that the respondent does not know the correct answer and resigns from responding on the scale. “Not applicable” means that the respondent did not encounter such a case in his professional practice before, thus he/she is unable to provide answer on the scale. Surveys in which respondents left ﬁelds without any value were also taken into account at the stage of data analysis. The survey contained the following questions: Q1: Please evaluate the signiﬁcance of information on the costs of bankruptcy pro- ceedings for ensuring the informational transparency of bankruptcy proceedings. Q2: Please evaluate the signiﬁcance of information on the assumption adopted in the ﬁnancial statements on the absence of entity’s ability to going concern assumption. Q3: Please evaluate the signiﬁcance of the information on the assets book value. Q4: Please evaluate the signiﬁcance of the information on the course of bankruptcy proceedings. Q5: Please evaluate the signiﬁcance of the information on the estimated net liquidation value. Q6: Please evaluate the signiﬁcance of the information on the book value. Q7: Please evaluate the importance of information from the ﬁnancial statements prepared for a day in a period of 30 days before submitting the application. Q8: Please evaluate the importance of information on the net liquidation value of assets. Risks 2021, 9, 64 8 of 18 The basic thesis assumed in the considerations is the assumption that certain of the typical information used within the framework of bankruptcy proceedings risk is necessary to make the correct decision. This means that ensuring informational transparency is linked to minimizing the risk of bankruptcy proceedings, as it provides the basis for making the correct decision that is pursuant to the provisions of law. Therefore, the following research questions can be formulated: Which of the typical bits of information used within the framework of bankruptcy proceedings risk is necessary to make the correct decision? Of the typical information used as part of the risk assessment of bankruptcy proceed- ings, which are usually taken into account in such a situation, are there elements that are actually unnecessary? Are there any combinations (perhaps an alternative to each other) of correlated types of information that jointly determine the accuracy of assessing the legitimacy for conducting bankruptcy proceeding? Analysis of the contents discussed in the theoretical part of the considerations enables making certain hypotheses, which may aid explaining the investigated problem: H1: Financial information that does not originate from ﬁnancial statements are of key importance for the conduct of a bankruptcy proceedings. H2: Financial information that originates from ﬁnancial statements are signiﬁcant for the conduct of bankruptcy proceedings. H3: Financial information originating and not originating from ﬁnancial statements bear similar signiﬁcance in the opinion of respondents. H4: Information concerning the course of a bankruptcy proceedings is of lower signiﬁcance than ﬁnancial information. Financial information originating from ﬁnancial statements was classiﬁed to those included in questions Q2, Q3, Q6, and Q7. Financial information not originating from ﬁnancial statements was classiﬁed to those included in questions Q1, Q5, and Q8. Question on the information about the course of bankruptcy proceedings is included in Q4. The study applied basic statistical analysis of answers to survey questions, and then the potential scope of correlations between them was analyzed. As shown by the conducted international literature review, the presented study is of precursor nature. Therefore, it is impossible to compare it with results from other countries. However, the concept of bankruptcy proceedings objective (i.e., its efﬁcient conduct, reliable settlement of creditors’ claims) remains universal. Also, the reduction of informational asymmetry and providing for the informational needs of the stakeholders, which may translate into minimized risk of bankruptcy proceedings is of universal nature. The informational needs may differ between countries due to the professional experience of respondents. Therefore, conducting the study in Poland can be viewed as valid, considering the extensiveness of informational requirements in bankruptcy proceedings, and thus the experience of insolvency practitioners utilizing different sources of information is relatively comprehensive. 4. Results The presentation of the research results consists of three parts that are discussed one after another. The ﬁrst describes the results of the basic statistical analysis of each of the three questions. The second section provides a ranking that allows to evaluate the relative importance of each of the three types of information. The third discusses the correlations between the responses given by the respondents to the three consecutive questions. The authors are aware that the 5-point Likert scale indicates the use of an ordinal variable. Therefore, as a part of the analysis, the authors present the distribution of the results as divided into fractions that can be distinguished in the set of answers indicated Risks 2021, 9, x FOR PEER REVIEW 9 of 18 the experience of insolvency practitioners utilizing different sources of information is rel- atively comprehensive. 4. Results The presentation of the research results consists of three parts that are discussed one after another. The first describes the results of the basic statistical analysis of each of the three questions. The second section provides a ranking that allows to evaluate the relative importance of each of the three types of information. The third discusses the correlations between the responses given by the respondents to the three consecutive questions. The authors are aware that the 5-point Likert scale indicates the use of an ordinal variable. Therefore, as a part of the analysis, the authors present the distribution of the Risks 2021, 9, 64 9 of 18 results as divided into fractions that can be distinguished in the set of answers indicated by the respondents (and they use Rho to calculate the correlation). However, due to the possibility of interpretation and synthesis of the results, the authors also use the mean by the respondents (and they use Rho to calculate the correlation). However, due to the value (as a measure of typicality) and standard deviation (which is a synthetic approach possibility of interpretation and synthesis of the results, the authors also use the mean to the differentiation of responses). This is justified due to the fact that the purpose of the value (as a measure of typicality) and standard deviation (which is a synthetic approach analysis is not to study the factors differentiating the opinions of respondents, but the to the differentiation of responses). This is justiﬁed due to the fact that the purpose of purpose is to give a general, relative value to the respective types of information (and, the analysis is not to study the factors differentiating the opinions of respondents, but the consequently, to propose their hierarchical arrangement). Such an approach is acceptable purpose is to give a general, relative value to the respective types of information (and, in the case of scientific analysis of a similar nature. consequently, to propose their hierarchical arrangement). Such an approach is acceptable As for the data characterizing the first question regarding the significance of infor- in the case of scientiﬁc analysis of a similar nature. mation on the costs of bankruptcy proceedings (Figure 1), the most numerous group of As for the data characterizing the ﬁrst question regarding the signiﬁcance of infor- respondents chose the answer indicating value 5—it was 46 individuals. The second most mation on the costs of bankruptcy proceedings (Figure 1), the most numerous group of frequent option—with a result only slightly worse, because it was based on the opinion of respondents chose the answer indicating value 5—it was 46 individuals. The second most 39 individuals out of 103 respondents—was the answer assigned to value 4. The next op- frequent option—with a result only slightly worse, because it was based on the opinion tions were chosen much less frequently: value 3 was chosen by 8 individuals, value 2 was of 39 individuals out of 103 respondents—was the answer assigned to value 4. The next chosen by 5 individuals and the value 1 was chosen by only 1 person. Among other avail- options were chosen much less frequently: value 3 was chosen by 8 individuals, value 2 able options, the answer “I don’t know” appeared once in the survey results, also on one was chosen by 5 individuals and the value 1 was chosen by only 1 person. Among other occasion there was chosen the option “not applicable” and the field was also left blank available options, the answer “I don’t know” appeared once in the survey results, also twice. on one occasion there was chosen the option “not applicable” and the ﬁeld was also left blank twice. Figure 1. Graph of answers to the ﬁrst question regarding the signiﬁcance of information on the costs Figure 1. Graph of answers to the first question regarding the significance of information on the costs of of bankr bank uptcy ruptcy pr proceed oceedings. ings Sour . Sou ce. rce Own . Own stu study d . y. Responses to the second question regarding the signiﬁcance of information on the assumption adopted in the ﬁnancial statements on the absence of entity’s ability to going concern assumption (Figure 2) were clearly dominated by the choice of the option indi- cating the value of 4. This judgment was expressed by 44 respondents. Values 5 and 3 were indicated by a very similar group of individuals, because 23 and 22 respondents, respectively, did so. Only 7 individuals chose the option with a value of 2 and only 2 respondents chose to indicate the value 1. Like in the case with the ﬁrst question, thus so in case of the second question 2 blank ﬁelds were registered. There appeared 1 indication for the answer “does not apply” and twice there appeared “I do not know.” Risks 2021, 9, x FOR PEER REVIEW 10 of 18 Responses to the second question regarding the significance of information on the assumption adopted in the financial statements on the absence of entity’s ability to going concern assumption (Figure 2) were clearly dominated by the choice of the option indi- cating the value of 4. This judgment was expressed by 44 respondents. Values 5 and 3 were indicated by a very similar group of individuals, because 23 and 22 respondents, respectively, did so. Only 7 individuals chose the option with a value of 2 and only 2 respondents chose to indicate the value 1. Like in the case with the first question, thus so in case of the second question 2 blank fields were registered. There appeared 1 indication Risks 2021, 9, 64 10 of 18 for the answer “does not apply” and twice there appeared “I do not know.” Figure 2. Graph of answers to the second question regarding the signiﬁcance of information on the Figure 2. Graph of answers to the second question regarding the significance of information on the assumption adopted in the ﬁnancial statements on the absence of entity’s ability to going concern assumption adopted in the financial statements on the absence of entity's ability to going concern assumption. Source. Own study. assumption. Source. Own study. The answers to the third question regarding the signiﬁcance of the information on the The answers to the third question regarding the significance of the information on assets book value (Figure 3) are the most even, although the dominant value can also be the assets book value (Figure 3) are the most even, although the dominant value can also indicated here. Total of 28 individuals chose the answer to which the value 3 was assigned. be indicated here. Total of 28 individuals chose the answer to which the value 3 was as- The next option in terms of the frequency of occurrence in the survey results—i.e., the value signed. The next option in terms of the frequency of occurrence in the survey results—i.e., 5—was indicated by 24 respondents. About 20 other individuals decided to express their the value 5—was indicated by 24 respondents. About 20 other individuals decided to ex- opinion by choosing value 4. The answer assigned to the value 2 collected 18 responses, press their opinion by choosing value 4. The answer assigned to the value 2 collected 18 Risks 2021, 9, x FOR PEER REVIEW 11 of 18 and the value 1 was selected by 7 respondents. Three individuals answered by choosing the responses, and the value 1 was selected by 7 respondents. Three individuals answered by option “not applicable,” 1 person decided to answer “I don’t know” and 2 other individuals choosing the option “not applicable,” 1 person decided to answer “I don’t know” and 2 left the ﬁeld blank in the questionnaire. other individuals left the field blank in the questionnaire. In case of the fourth question regarding the significance of the information on the course of bankruptcy proceedings (Figure 4), the value of 5 was definitely the most fre- quent (56 individuals selected it). Option 4 was the next most popular one as 37 respond- ents chose it. 6 individuals expressed their assessment pointing to a value of 3. 2 blank fields and 1 “not applicable” and 1 “don’t know” were registered. Nobody indicated the values 1 and 2. The results were clearly focused on the choice between the values 5 (more often) and 4 (slightly less often). The set of answers to the fifth question regarding the significance of the information on the estimated net liquidation value (Figure 5) is very similar to the analogous set char- acterizing question 1. The answer that indicates 5 (45 individuals) is dominant, but the difference, when compared to the indications to value 4, is very small (44 individuals). Against this background, the remaining options are represented to a very limited extent. Figure 3. Graph of answers to the third question regarding the signiﬁcance of the information on the Value 3 was chosen by 9 respondents and one respondent indicated value 2. Nobody de- Figure 3. Graph of answers to the third question regarding the significance of the information on assets book value. Source. Own study. cided to express his assessment with value 1. Additionally, answer “I don’t know” ap- the assets book value. Source. Own study. peared once, the answer “does not apply” also once, and 2 respondents did not give any In case of the fourth question regarding the signiﬁcance of the information on the answers to the fifth question. course of bankruptcy proceedings (Figure 4), the value of 5 was deﬁnitely the most frequent (56 individuals selected it). Option 4 was the next most popular one as 37 respondents chose it. 6 individuals expressed their assessment pointing to a value of 3. 2 blank ﬁelds and 1 “not applicable” and 1 “don’t know” were registered. Nobody indicated the values 1 and 2. The results were clearly focused on the choice between the values 5 (more often) and 4 (slightly less often). Figure 4. Graph of answers to the fourth question regarding the significance of the information on the course of bankruptcy proceedings. Source. Own study. The graph illustrating the responses to the sixth question (Figure 6), regarding the significance of the information on the book value, has a clearly different shape when com- pared with the previous question. The value of 3 dominates in the indications of the re- spondents and this is the result of giving this type of answer by 45 individuals. Total of 19 respondents expressed their opinion by indicating value 4, and the next 18 respondents decided to choose the value 5 option. Value 2 appears 11 times in the set of answers while value 1 appears five times. Two individuals chose the answer “I don’t know,” 1 person indicated the option “not applicable,” twice an empty questionnaire field was registered in relation to question 6. Risks 2021, 9, x FOR PEER REVIEW 11 of 18 Risks 2021, 9, x FOR PEER REVIEW 11 of 18 Figure 3. Graph of answers to the third question regarding the significance of the information on the assets book value. Source. Own study. Figure 3. Graph of answers to the third question regarding the significance of the information on Risks 2021, 9, 64 11 of 18 the assets book value. Source. Own study. Figure 4. Graph of answers to the fourth question regarding the significance of the information on the course of bankruptcy proceedings. Source. Own study. Figure 4. Graph of answers to the fourth question regarding the signiﬁcance of the information on Figure 4. Graph of answers to the fourth question regarding the significance of the information on the course of bankruptcy proceedings. Source. Own study. the course of bankruptcy proceedings. Source. Own study. The graph illustrating the responses to the sixth question (Figure 6), regarding the significance of the information on the book value, has a clearly different shape when com- The set of answers to the ﬁfth question regarding the signiﬁcance of the information The graph illustrating the responses to the sixth question (Figure 6), regarding the pared with the previous question. The value of 3 dominates in the indications of the re- on the estimated net liquidation value (Figure 5) is very similar to the analogous set significance of the information on the book value, has a clearly different shape when com- spondents and this is the result of giving this type of answer by 45 individuals. Total of characterizing question 1. The answer that indicates 5 (45 individuals) is dominant, but pared with the previous question. The value of 3 dominates in the indications of the re- 19 respondents expressed their opinion by indicating value 4, and the next 18 respondents the difference, when compared to the indications to value 4, is very small (44 individuals). spondents and this is the result of giving this type of answer by 45 individuals. Total of decided to choose the value 5 option. Value 2 appears 11 times in the set of answers while Against this background, the remaining options are represented to a very limited extent. 19 respondents expressed their opinion by indicating value 4, and the next 18 respondents value 1 appears five times. Two individuals chose the answer “I don’t know,” 1 person Value 3 was chosen by 9 respondents and one respondent indicated value 2. Nobody decided to choose the value 5 option. Value 2 appears 11 times in the set of answers while indicated the option “not applicable,” twice an empty questionnaire field was registered decided to express his assessment with value 1. Additionally, answer “I don’t know” value 1 appears five times. Two individuals chose the answer “I don’t know,” 1 person in relation to question 6. appeared once, the answer “does not apply” also once, and 2 respondents did not give any indicated the option “not applicable,” twice an empty questionnaire field was registered answers to the ﬁfth question. in relation to question 6. Figure 5. Graph of answers to the ﬁfth question regarding the signiﬁcance of the information on the estimated net liquidation value. Source. Own study. The graph illustrating the responses to the sixth question (Figure 6), regarding the signiﬁcance of the information on the book value, has a clearly different shape when compared with the previous question. The value of 3 dominates in the indications of the respondents and this is the result of giving this type of answer by 45 individuals. Total of 19 respondents expressed their opinion by indicating value 4, and the next 18 respondents decided to choose the value 5 option. Value 2 appears 11 times in the set of answers while value 1 appears ﬁve times. Two individuals chose the answer “I don’t know,” 1 person indicated the option “not applicable,” twice an empty questionnaire ﬁeld was registered in relation to question 6. Risks 2021, 9, x FOR PEER REVIEW 12 of 18 Risks 2021, 9, x FOR PEER REVIEW 12 of 18 Figure 5. Graph of answers to the fifth question regarding the significance of the information on the estimated net liquidation value. Source. Own study. Figure 5. Graph of answers to the fifth question regarding the significance of the information on Risks 2021, 9, 64 12 of 18 the estimated net liquidation value. Source. Own study. Figure 6. Graph of answers to the sixth question regarding the significance of the information on the book value. Source. Own study. Figure 6. Graph of answers to the sixth question regarding the signiﬁcance of the information on the Figure 6. Graph of answers to the sixth question regarding the significance of the information on book value. Source. Own study. the book value. Source. Own study. The seventh question, regarding the importance of information from the financial statements prepared for a day in a period of 30 days before submitting the application, The seventh question, regarding the importance of information from the ﬁnancial The seventh question, regarding the importance of information from the financial has a slightly more flattened distribution of answers than the previous question (Figure statements prepared for a day in a period of 30 days before submitting the application, statements prepared for a day in a period of 30 days before submitting the application, 7). The highest number of indications was recorded with option 4 (37 respondents did so). has a slightly more ﬂattened distribution of answers than the previous question (Figure 7). has a slightly more flattened distribution of answers than the previous question (Figure The value of 3 was the next one, chosen by 30 individuals. On the other hand the answer The highest number of indications was recorded with option 4 (37 respondents did so). 7). The highest number of indications was recorded with option 4 (37 respondents did so). indicating value 5 was given by 21 respondents. Value 2 appeared eight times in the an- The value of 3 was the next one, chosen by 30 individuals. On the other hand the answer The value of 3 was the next one, chosen by 30 individuals. On the other hand the answer swer set and value 1 appeared only once. One person answered by choosing the option “I indicating value 5 was given by 21 respondents. Value 2 appeared eight times in the answer indicating value 5 was given by 21 respondents. Value 2 appeared eight times in the an- don’t know,” 2 individuals chose the option “not applicable,” and 3 persons left the sev- set and value 1 appeared only once. One person answered by choosing the option “I don’t swer set and value 1 appeared only once. One person answered by choosing the option “I enth question without answering. know,” 2 individuals chose the option “not applicable,” and 3 persons left the seventh don’t know,” 2 individuals chose the option “not applicable,” and 3 persons left the sev- question without answering. enth question without answering. Figure 7. Graph of answers to the seventh question regarding the importance of information from Figure 7. Graph of answers to the seventh question regarding the importance of information from the ﬁnancial statements prepared for a day in a period of 30 days before submitting the application. the financial statements prepared for a day in a period of 30 days before submitting the applica- Source. Own study. Figure 7. tion. Sour Graph of answers to the seventh question re ce. Own study. garding the importance of information from the financial statements prepared for a day in a period of 30 days before submitting the applica- The last, eight question regarding the importance of information on the net liquidation tion. Source. Own study. The last, eight question regarding the importance of information on the net liquida- value of assets (Figure 8) is again characterized by a certain shift of the collected answers tion value of assets (Figure 8) is again characterized by a certain shift of the collected an- towards higher values. Option 5 was chosen by the greatest number, as many as 47 The last, eight question regarding the importance of information on the net liquida- swers towards higher values. Option 5 was chosen by the greatest number, as many as 47 respondents. This is even more visible against the background of the next (in terms of tion value of assets (Figure 8) is again characterized by a certain shift of the collected an- respondents. This is even more visible against the background of the next (in terms of frequency of occurrence) value, which is 4 and which was indicated by 37 individuals. swers towards higher values. Option 5 was chosen by the greatest number, as many as 47 frequency of occurrence) value, which is 4 and which was indicated by 37 individuals. About 13 times the value 3 appeared in the set of answers. However, no one decided to respondents. This is even more visible against the background of the next (in terms of About 13 times the value 3 appeared in the set of answers. However, no one decided to choose the options related to the values 1 and 2. The following options: “I don’t know,” “not frequency of occurrence) value, which is 4 and which was indicated by 37 individuals. choose the options related to the values 1 and 2. The following options: “I don’t know,” applicable” or leaving the eighth question unanswered, were selected by two individuals About 13 times the value 3 appeared in the set of answers. However, no one decided to “not applicable” or leaving the eighth question unanswered, were selected by two indi- in each of these three cases. choose the options related to the values 1 and 2. The following options: “I don’t know,” viduals in each of these three cases. “not applicable” or leaving the eighth question unanswered, were selected by two indi- viduals in each of these three cases. Risks 2021, 9, x FOR PEER REVIEW 13 of 18 Risks 2021, 9, 64 13 of 18 Figure 8. Graph of answers to the eighth question regarding the importance of information on the Figure 8. Graph of answers to the eighth question regarding the importance of information on the net liquidation value of assets. Source. Own study. net liquidation value of assets. Source. Own study. The detailed test results presented above have several characteristic properties. The The detailed test results presented above have several characteristic properties. The answers to the fourth question are by far the most concentrated around the right end of answers to the fourth question are by far the most concentrated around the right end of the range that deﬁnes the scope of available values. The calculated mean value of the the range that defines the scope of available values. The calculated mean value of the in- indications in this case is 4.51 (Table 1). A similar phenomenon occurs when the analysis dications in this case is 4.51 (Table 1). A similar phenomenon occurs when the analysis concerns the eighth question (average value at the level of 4.35), the ﬁfth (average value concerns the eighth question (average value at the level of 4.35), the fifth (average value at the level of 4.34) and the ﬁrst one (average value at the level of 4.25). The dependence at the level of 4.34) and the first one (average value at the level of 4.25). The dependence observed here consist in this that the higher the value of the answer, the larger group observed here consist in this that the higher the value of the answer, the larger group of of individuals chose it (although the distance between the option denoting the values 5 individuals chose it (although the distance between the option denoting the values 5 and and 4 in the case of the ﬁrst and ﬁfth questions is not large). In the case of the second 4 in the case of the first and fifth questions is not large). In the case of the second question, question, it is also easy to indicate the dominant option, which was selected by indicating it is also easy to indicate the dominant option, which was selected by indicating the value the value of 4. The value of 4 in the second question deﬁnitely dominates all other in of 4. The value of 4 in the second question definitely dominates all other in terms of fre- terms of frequency of indications. Such a shift of the dominant option toward lower values quency of indications. Such a shift of the dominant option toward lower values results in results in a decrease in the average value, which in the case of summed answers to the a decrease in the average value, which in the case of summed answers to the second ques- second question was only 3.81. The next place in the ranking is occupied by the seventh tion was only 3.81. The next place in the ranking is occupied by the seventh question with question with an average value of 3.71 which precedes the third question (the average an average value of 3.71 which precedes the third question (the average value here is 3.37). value here is 3.37). However, as one can read from the graphic illustration presenting the However, as one can read from the graphic illustration presenting the results of answers results of answers to the third question, there are two vertices of the graph, which is also to the third question, there are two vertices of the graph, which is also the flattest one. The the ﬂattest one. The sixth question is an example of a further shift of the mean value of the sixth question is an example of a further shift of the mean value of the answer toward the answer toward the lower ranges of the set of available options as the mean score was 3.35. lower ranges of the set of available options as the mean score was 3.35. This result is close This result is close to the middle of the range, which includes all available options. This is to the middle of the range, which includes all available options. This is confirmed by the conﬁrmed by the highest frequency of selecting a value of 3. As a result of calculating the highest frequency of selecting a value of 3. As a result of calculating the value of standard value of standard deviations for individual questions of the survey, it can be concluded deviations for individual questions of the survey, it can be concluded that where the mean that where the mean value is higher than 4, the respondents’ answers had to be closer value is higher than 4, the respondents’ answers had to be closer one to another when one to another when compared with other cases. The analysis of the proportion indicator compared with other cases. The analysis of the proportion indicator shows that its values shows that its values only in the case of questions 1.4, 5, 8 reach a level higher than 0.80, only in the case of questions 1.4, 5, 8 reach a level higher than 0.80, while the estimation while the estimation errors associated with this indicator reach a level lower than 0.08 (the errors associated with this indicator reach a level lower than 0.08 (the proportion indicator proportion indicator combines responses indicating either high (4) or crucial (5) importance combines responses indicating either high (4) or crucial (5) importance of information of of information of a given type). This distinguishes the above group consisting of these four a given type). This distinguishes the above group consisting of these four questions from questions from all the other questions included in the survey, for which the proportion all the other questions included in the survey, for which the proportion indicator assumes indicator assumes values lower than 0.66 and the estimation errors related to this indicator valu take es lower values th gr an eater 0.66 than and t 0.09. he estimation errors related to this indicator take values greater than 0.09. Table 1. Basic statistics of the survey questions. Numbers from 1 to 5 in the first column represent answer options (1 means completely irrelevant information and 5 means crucial information). The Proportion Indicator combines responses indicating either high (4) or crucial (5) importance of information of a given type. (Confidence level p = 0.95). Source. Own study. Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Mean Value 4.5 3.81 3.37 4.51 4.34 3.35 3.71 4.35 Risks 2021, 9, 64 14 of 18 Table 1. Basic statistics of the survey questions. Numbers from 1 to 5 in the ﬁrst column represent answer options (1 means completely irrelevant information and 5 means crucial information). The Proportion Indicator combines responses indicating either high (4) or crucial (5) importance of information of a given type. (Conﬁdence level p = 0.95). Source. Own study. Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Mean Value 4.5 3.81 3.37 4.51 4.34 3.35 3.71 4.35 Estimation Error 0.177 0.186 0.247 0.120 0.134 0.210 0.185 0.139 Upper Limit 4.427 3.996 3.617 4.630 4.474 3.560 3.895 4.489 Lower Limit 4.073 3.624 3.123 4.390 4.206 3.140 3.525 4.211 Srandard Deviation 0.88 0.94 1.24 0.61 0.68 1.06 0.93 0.70 1 0.01 0.02 0.07 0.00 0.00 0.05 0.01 0.00 Estimation Error 0.019 0.027 0.049 0.000 0.000 0.042 0.019 0.000 2 0.05 0.07 0.17 0.00 0.01 0.11 0.08 0.00 Estimation Error 0.042 0.049 0.072 0.000 0.019 0.060 0.052 0.000 3 0.08 0.21 0.28 0.06 0.09 0.44 0.29 0.13 Estimation Error 0.052 0.078 0.087 0.046 0.055 0.096 0.087 0.065 4 0.38 0.43 0.19 0.36 0.42 0.18 0.36 0.36 Estimation Error 0.093 0.095 0.076 0.093 0.099 0.074 0.096 0.093 5 0.44 0.22 0.23 0.54 0.44 0.17 0.20 0.45 Estimation Error 0.095 0.080 0.081 0.096 0.096 0.072 0.077 0.096 “I don’t know” 0.01 0.02 0.01 0.01 0.01 0.02 0.01 0.02 Estimation Error 0.019 0.027 0.019 0.019 0.019 0.027 0.019 0.027 “not applicable” 0.01 0.01 0.03 0.01 0.01 0.01 0.02 0.02 Estimation Error 0.019 0.019 0.033 0.019 0.019 0.019 0.027 0.027 “blank space” 0.02 0.02 0.02 0.02 0.02 0.02 0.03 0.02 Estimation Error 0.027 0.027 0.027 0.027 0.027 0.027 0.033 0.027 Proportion Indicator 0.82 0.65 0.42 0.90 0.86 0.35 0.56 0.81 Estimation Error 0.074 0.092 0.095 0.058 0.067 0.092 0.095 0.076 Upper Limit 0.894 0.742 0.515 0.958 0.927 0.442 0.655 0.886 Lower Limit 0.746 0.558 0.325 0.842 0.793 0.258 0.465 0.734 The last issue that needs to be analyzed is the extent of the correlation between the answers given by the respondents to the survey questions (Table 2). In the case of the ﬁrst question, the latter is most strongly correlated with the fourth (correlation at the level of 0.61) and the ﬁfth question (correlation at the level of 0.45). It should be remembered that this is the group of questions that scored the highest average score in the opinion of the respondents (the average value for each of these questions exceeded 4, which happened also only in the eighth question). The second question correlates most strongly with the seventh question (correlation at the level of 0.51). The third question is linked to the sixth question by a correlation at the level of 0.83 and to the seventh question at the level of 0.52. The fourth question is most closely correlated with the ﬁfth (0.51) and eighth (0.52) questions. The ﬁfth question shows the highest correlation with the eighth question (0.70) and then (as already mentioned) with the fourth question. The sixth question (apart from the aforementioned correlation with the third question) shows a notable correlation (0.50) in relation to the seventh question. Thus, the seventh question is most strongly connected with the second (0.51), third (0.52) and sixth (0.50) questions. The eighth question shows the highest correlation with the ﬁfth (0.70) and fourth (0.52) questions. In general, the obtained results are characterized by high statistical signiﬁcance—only in the case of the correlation of the ﬁrst question with the sixth and seventh questions, the probability of an error is signiﬁcantly higher. Risks 2021, 9, 64 15 of 18 Table 2. Correlation table (Spearman’s rank correlation coefﬁcients) between survey questions [* correlation is signiﬁcant at the 0.05 level; ** correlation is signiﬁcant at the 0.01 level; *** correlation is signiﬁcant at the 0.001 level]. Source. Own study. Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q1 1 Q2 0.27 ** 1 Q3 0.23 * 0.35 *** 1 Q4 0.61 *** 0.43 *** 0.39 *** 1 Q5 0.45 *** 0.46 *** 0.29 ** 0.51 *** 1 Q6 0.16 0.40 *** 0.83 *** 0.37 *** 0.39 *** 1 Q7 0.18 0.51 *** 0.52 *** 0.38 *** 0.30 ** 0.50 *** 1 Q8 0.38 *** 0.34 *** 0.40 *** 0.52 *** 0.70 *** 0.47 *** 0.35 *** 1 5. Discussion and Conclusions The discussed study results constitute a continuation of studies concerning the de- mand expressed by specialists in the ﬁeld of insolvency for different types of information, both originating from ﬁnancial statements as well as other sources. A comprehensive anal- ysis aims at explaining the hierarchy of information contained in the bankruptcy process database. This article has focused on the information used at an early stage of bankruptcy process as bearing key signiﬁcance for the minimization of bankruptcy proceedings risk. It was assumed that ensuring informational transparency is linked to minimizing the risk of bankruptcy proceedings, as it provides the basis for making the correct decision that is pursuant to the provisions of law. As a result of the conducted study it was determined that mean evaluations of insol- vency specialists concerning the signiﬁcance of individual types of information are within the range from 3.35 to 4.51, thus all being above the mean value of the assumed scale (3.0). Moreover, the evaluations of information not originating from ﬁnancial statements were higher (from 4.25 to 4.51) than for information originating from ﬁnancial statements (from 3.35 to 3.81). In connection with the above observation, it should be assumed that the hypotheses H1 and H2 were positively veriﬁed. In both cases, the responses are above average. However, as stated in the hypotheses, higher mean values were obtained for ﬁnancial information that did not originate from ﬁnancial statements (questions Q1, Q5, and Q8) than the mean values obtained for ﬁnancial information that originated from ﬁnancial statements (questions Q2, Q3, Q6, and Q7). The H3 hypothesis was veriﬁed negatively since the information that did not originate from ﬁnancial statements had a clearly higher average rating than the information derived from ﬁnancial statements. Re- sults of the study have conﬁrmed the outcomes obtained from the literature review (e.g., Altman and Hotchkiss 2006; Marsh 2010; Finch 2012; Morawska 2013; Bauer 2013; Prusak et al. 2019; Staszkiewicz and Morawska 2019; Bauer and Hospodka 2020), stating that insolvency specialists prioritize the information not originating from ﬁnancial reporting, i.e., information on the costs of bankruptcy proceedings, estimate valuations concerning assets value and commercial values. Insolvency specialists have put the greatest emphasis on the information concerning the course of bankruptcy proceedings, which are attached to judicial acts, both at the preliminary and main stage of bankruptcy proceedings. Therefore, it should be concluded that hypothesis H4 was veriﬁed negatively, which is conﬁrmed by the answers to question Q4. In addition, the general picture presented by the alternative approach that consists in comparing the proportion indicators values which characterize the respective questions in the survey, seems to be fully convergent with the analysis already carried out. This indicator is based on the assumption that, in fact, the opinions of the respondents indicate only the above-average signiﬁcance of a given type of information or the lack of such signiﬁcance. Based on such a simple criterion, it can be concluded that in the set of eight types of information, there occur the differences leading to the conclusions described above. Risks 2021, 9, 64 16 of 18 Correlation between individual types of answers to all indications remained in the range from 0.16 to 0.83. The highest correlation level (0.83) was exhibited by the correlation between the answer concerning importance of the information on the assets book value, and the information on the book value. Such dependence conﬁrms the consistency of the assessments made. But in fact more notable are the correlations which allow two groups of related questions to emerge. The ﬁrst one embraces questions referring to the signiﬁcance of information: on the costs of bankruptcy proceedings, on the course of bankruptcy proceedings, on the estimated net liquidation value, on the net liquidation value of assets. The second group embraces questions referring to the signiﬁcance of information: on the going concern assumption, on the assets book value, on the book value, from the ﬁnancial statements prepared for a day in a period of 30 days before submitting the application. The information database of an insolvency process contains information on book value originating from balance sheet. However, the Polish provisions of law being in effect from 2009 do not order submitting at court the additional information to the ﬁnancial statements—such as the information on the going concern assumption (Bauer and Hospodka 2021). Answers of the respondents may indicate the need of introducing changes to the provisions of law concerning the analyzed types of information. Results of the study are not of a directly applicational character. Its objective was to discover the opinion of the respondents, who have practical or scholar experience, and who often combine theory with practice of bankruptcy proceedings in Poland. Finding out the opinion of the respondents who are stakeholders in bankruptcy proceedings by examining their satisfaction with the information provided aims at determining the usability of individual information types. As pointed out by Maczy ˛ nska ´ (2008), for instance, the bankruptcy diagnosis itself may contribute to the minimization of negative outcomes of the phenomenon. As shown by the literature review, the study presented in the article is of a precursor nature. The aim of the authors is to induce the circles of scientists and practitioners focusing on the problem of bankruptcy to undertake analogous research in other European countries. In particular, the aim is to propose a standard for a research procedure suitable for duplication in other countries, which would allow a comparable diagnosis of the informational needs of stakeholders of bankrupt entities in countries other than Poland. This may positively affect the changes in informational requirements in bankruptcy processes on an international scale. By developing universal standards as a result of the analysis of many cases, it will also be possible to use such knowledge in the work of professions such as an actuary in the future. The knowledge of which information is crucial to take a relevant decision to commence bankruptcy proceedings allows to estimate the consequences of their possible absence, limited scope, ambiguity or low reliability. Therefore, the article constitutes an open discussion, which in effect may lead to the development of a standard objectivizing assessment of bankruptcy proceedings risk, which in times of globalization, seems to be invaluable. The research results contribute to further analyses related to the role of information in the insolvency proceedings. The relatively small population of insolvency specialists in Poland is a limitation to the conducted study. Furthermore, a certain limitation is the lack of accurate data on the size of the population from which respondents representing certain functions in bankruptcy processes originate, e.g., the number of court departments conducting bankruptcy proceedings in Poland. However, no data are available on a speciﬁc number of judges conducting bankruptcy proceedings. It is also problematic for the survey to reach respondents dealing with bankruptcy cases in other countries than the Poland, where the research has been carried out. However, the authors believe that owing to the signiﬁcance of the subject it will contribute to undertaking analogous research in other countries. Studies related to the information used in insolvency processes may contribute to reducing the risk of bankruptcy proceedings and favor efﬁciency of the actions taken. The research will be continued with regards to the methods of information transfer, constituting response to the need of stakeholders of bankrupt enterprises. Risks 2021, 9, 64 17 of 18 Author Contributions: M.B. and K.B. contributed equally to all parts. All authors have read and agreed to the published version of the manuscript. Funding: This research received no external funding. 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ISSN: 2227-9091
DOI: 10.3390/risks9040064
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Abstract

risks Article The Role of Information in Assessing the Risk of Conducting Bankruptcy Proceedings 1 , 2 Michał Baran * and Kinga Bauer Institute of Economics, Finance and Management, Faculty of Management and Social Communication, Jagiellonian University, ul. Łojasiewicza 4, Room 2.378, 30-348 Kraków, Poland Department of Accounting, College of Management and Quality Sciences, Institute of Management, Cracow University of Economics, ul. Rakowicka 27, 31-510 Kraków, Poland; kinga.bauer@uek.krakow.pl * Correspondence: michal.baran@uj.edu.pl Abstract: Modern management means making managerial decisions in many situations—including the administrative ordering of matters of a bankrupt enterprise. The situation in which the court approves the opening of bankruptcy proceedings is strictly regulated by law. This does not mean, however, that such a decision is made under conditions of certainty as to its consequences. The risk of making a wrong decision has signiﬁcant consequences for everyone who is interested in it (the bankrupt company, its partners, employees, banks, the tax ofﬁce). The purpose of this article is to explain the importance and signiﬁcance of the various types of information that are used to reliably assess the value of a failing enterprise’s assets. The information of individual types is analyzed in the decision-making process which leads to the right decision on whether to start bankruptcy proceedings. Therefore, in the theoretical part, the authors prepare a list of types of information used in the mentioned process. Then the authors present the results of a survey (103 specialists in the ﬁeld of bankruptcy), which allows to assess the real meaning of information of individual types. The main contribution for which the present paper is responsible is the description of the Citation: Baran, Michał, and Kinga veriﬁed tool which functioned in the form of the survey that was applied in the study and the result Bauer. 2021. The Role of Information arising from conducting it. This survey was used to achieve the main objective that was focused in Assessing the Risk of Conducting Bankruptcy Proceedings. Risks 9: 64. on constructing the hierarchy of signiﬁcance of different types of information relating to the risk of https://doi.org/10.3390/risks conducting bankruptcy proceedings. The main ﬁndings show that in general insolvency specialists prioritize the information (ﬁnancial and also not ﬁnancial) not originating from ﬁnancial reporting. Academic Editor: Keywords: information management; risk management; bankruptcy proceedings; sustainability Zbysław Dobrowolski Received: 28 February 2021 Accepted: 29 March 2021 1. Introduction Published: 1 April 2021 Contemporary management covers various areas that are a manifestation of organized human activity. In addition to issues related strictly to commercial activity, an important Publisher’s Note: MDPI stays neutral subject of modern management interest is improving the rationality of decision-making with regard to jurisdictional claims in processes that shape the framework of such activity. The processes in question concentrate published maps and institutional afﬁl- on the processing of large collections of varied information and are key to generating value. iations. This sphere is also strongly related to investing in solutions to increase the security of information resources (Deane et al. 2019) and the credibility and reliability of the processes of their processing (Goldstein et al. 2011) because, as it turns out, such activities have a signiﬁcant impact on the valuation of traded resources. Research shows that the difﬁcult Copyright: © 2021 by the authors. market situation (or its improvement) in the case of large corporations determines the Licensee MDPI, Basel, Switzerland. valuation of the entire industry and the goods it uses (Jayanti and Jayanti 2011). One of the This article is an open access article speciﬁc areas that is important for shaping the rules of cooperation between commercial distributed under the terms and entities and ﬁnding what is the level of risk such entities are ready to accept in the event of conditions of the Creative Commons starting possible cooperation with other organizations is bankruptcy proceedings (Lukason Attribution (CC BY) license (https:// and Camacho-Miñano 2019). The commonly observed fairness and professionalism of creativecommons.org/licenses/by/ decisions that can potentially be expected when a court is considering bankruptcy is 4.0/). Risks 2021, 9, 64. https://doi.org/10.3390/risks9040064 https://www.mdpi.com/journal/risks Risks 2021, 9, 64 2 of 18 key to assessing the sense of initiating such a procedure. Nowadays, where the risk of doing business has increased signiﬁcantly as a result of the pandemic, the problem is becoming even more acute. Therefore, without the effective possibility of taking advantage of sanctions in the form of bankruptcy proceedings, the company’s contracting party will be exposed to additional risk while deciding to start cooperation (and sometimes will resign from a very attractive but risky contract). Contrary to the appearances, this case is much more complicated than it may initially appear to an outside observer (Horváthová and Mokrišová 2018). An application for a declaration of insolvency of an enterprise is ﬁled in court when there is a well-founded fear that the debtor ’s assets are too small to pay off most of his liabilities. This often happens too late even to pay off a small part of them. Thus, by deﬁnition, we are dealing with a deﬁcit in the value of assets. The assets must, however, be large enough for the accumulated resources to at least cover the administrative costs of the bankruptcy proceedings itself (while the surplus may be divided, in accordance with the law, between creditors). There- fore, unacceptable is the situation in which there are unexpectedly insufﬁcient funds for actions provided for under the procedure during the ongoing bankruptcy proceedings. The decision-maker (in this case a judge of the commercial court) who decides whether or not to initiate bankruptcy proceedings bears a very large responsibility in these circumstances. The difﬁculty of the situation results from the limited access to the necessary information, which, in addition, to a large extent is only a forecast or accounting data, the value of which often signiﬁcantly differs from the selling value of the debtor ’s assets (Maczy ˛ nska ´ 2009; Bauer 2014; Bauer 2015). Estimating the value of assets of a bankrupt organization can be carried out while using many different methods, however, the ﬁnal veriﬁcation of the accuracy of the assumptions that are made will take place on the free market when the moment of actual sale of the entire enterprise or its individual elements (which make up the value of the bankruptcy estate) takes place. The moment of the valuation may be signiﬁcantly distant in time from the sale of the asset. According to the Doing Business report, the average duration of bankruptcy proceedings in Poland is approx. 3 years (World Bank Group 2017, p. 232). In addition, the price that will be obtained will be the result of a combination of various current conditions (such as the temporary ﬁnancial capacity of a potential buyer, a change in the value of a bankrupt enterprise as a result of changes in demand for its products or services, or events such as further development of a pandemic) and as a result this price may signiﬁcantly differ from the expectations (Budzanowska-Drzewiecka et al. 2016). It may happen that some elements will have a higher value when they are combined into a whole (synergy effect), while when some component is missing, the value of the remaining set will dramatically decrease (this is the situation in the case of technological lines built from a set of devices that can also work separately). Taking into consideration the fact that the main contribution of the paper is the description of the veriﬁed tool in a form of the applied survey which was used to construct the hierarchy of signiﬁcance of different types of information relating to the risk of conducting bankruptcy proceedings, the main ﬁndings show that insolvency specialists prioritize the information (ﬁnancial and also not ﬁnancial) not originating from ﬁnancial reporting. In general, the launch of bankruptcy proceedings can also be viewed in terms of the sustainable development of the system of cooperating entities. The weakest entities that manage assets ineffectively are eliminated and the assets themselves go to new owners who are able to use them better. However, this will only happen if the entire process is professionally carried out and based on a reliable and realistic valuation. 2. Background Two basic issues should be clariﬁed when considering the role of information in assessing the risk of conducting bankruptcy proceedings. The ﬁrst is the answer to the question about the nature of information, i.e., its features, which are of key importance from the perspective of the possibility of using it in a reliable process of assessing the value of the Risks 2021, 9, 64 3 of 18 assets of a bankrupt organization. It is the properties characterizing the information itself that determine whether the right decision will be made owing to its correct interpretation (Dziekonski ´ 2017). The second question concerns the types of information sources that are used in the analyzed assessment procedure. 2.1. Features of Information Inﬂuencing the Risk Assessment in the Process of Property Valuation Information is an extremely difﬁcult concept to deﬁne, which results in the fact that there are many proposals to describe it. It can be said that the situational approach is dominant, in which the perspective of the needs in which information is used determines the way of deﬁning information. Currently, however, there is a certain consensus that allows us to state that in the case of information we are dealing with some kind of intangible resource. This resource is created as a contractual (i.e., recorded according to a certain ﬁxed notation) reﬂection of some aspect of dynamic reality. Then, such a mapping is the basis for indicating the originally registered feature of reality. Therefore, we are dealing with a certain model of reality that to a greater or lesser extent corresponds to the needs and expectations of the subject performing its interpretation (Burgin 2019). The accuracy of the decision to start or resign from bankruptcy proceedings depends on the role of the infor- mation used on this occasion. This is determined by the circumstances, the scope of which results primarily from the answers to the following questions (Wolfengagen et al. 2019; Birchler and Bütler 2007; Barkova et al. 2017): Does the decision-maker potentially have access to information on phenomena, the description of which he will actually need? Will the information be up to date? Will the information faithfully reﬂect the assessed reality? Will the information be complete? Will the information be interpretable? Will the information be unambiguous? Does the form of recording information allow for its further analysis and use in the decision-making process? Can information be obtained with the means available to the decision maker? Does the information represent the required level of detail? Does the information come from a reliable source? Can the information be attributed to a speciﬁc source? Does the information detail the image of the analyzed reality or does it repeat what already possessed information contains? Does the information have elements that allow it to be identiﬁed and easily found in a larger set? Does the information help to improve the accuracy of the decisions made? Could the information have been manipulated or distorted by the inﬂuence of addi- tional factors, people or phenomena? Does the information properly highlight the key aspects of the characterized reality? As a result of providing an unsatisfactory answer to a certain subset of the above questions, which relate to one or several of the above circumstances, there appears dys- functional situation that leads, among others, to the following consequences (Czekaj 2012; Mindt 2017): Inability to ﬁnd the necessary information due to its excess; Inability to use information due to its incompleteness; Inability to use the information due to its lack of clarity; Inability to use information due to its internal contradiction; The inability to use the information because of the fact that the information is out of date. The above-mentioned consequences of the occurrence of unfavorable circumstances, which signiﬁcantly affect the effects of using information in the process of assessing the Risks 2021, 9, 64 4 of 18 risk of conducting bankruptcy proceedings, may ultimately lead to a wrong decision. The judge making such a decision must be able to assess the risk of making a mistake and effectively minimize it. In pursuing this goal, the judge analyzes various documents, which are usually burdened with various defects resulting from the occurrence of the above-mentioned circumstances and their consequences (Stanczyk ´ et al. 2020). Therefore, in the following part of the discussion, typical information that appears in the process of making a decision about whether to proceed to bankruptcy proceedings will be discussed and critically analyzed. 2.2. Typical Information Constituting Basis for Insolvency Proceedings Risk Assessment The needs of enterprises going bankrupt and their stakeholders in the ﬁeld of infor- mation and types of such information can be viewed from both scientiﬁc as well as legal standpoint. Both approaches are linked to the judicial practice of bankruptcy proceedings. The accepted basis for the study in this topic is the statement cited in the literature that one of the undisputed roles of a bankruptcy proceedings is the reduction of information asymmetry (see i.a. Smith and Strömberg 2005; Bauer 2018a, 2018b). Analyses concern- ing different legal solutions should be conducted with the use of economic knowledge (Stiglitz 2004, p. 9). Actions aiming at improved diagnosis of the problem of enterprise bankruptcy should serve inhibiting the spread of negative consequences of bankruptcy (Maczy ˛ nska ´ 2008), thus favoring not only the stakeholder of the bankrupt, but also the entire society, and even contribute to improved functioning of economies at an international scale, which is in general embodied by the idea of sustainable development. Scientiﬁc research emphasizes the role of ﬁnancial information in the assessment of an indebted enterprise. Special attention is assigned to the information that originates from ﬁnancial statements of the obligor (Wedzki ˛ 2015; Zorn et al. 2017). Various types of information are discussed in literature as signiﬁcant and even of priority for the conduct of a bankruptcy proceedings. Special rank is assigned to the information on the costs of bankruptcy proceedings and valuation of assets of the obligor. The reporting informa- tion, particularly referring to the going concern assumption is indicated as a signiﬁcant supplement of the decision process (Bauer and Hospodka 2020). Literature studies have shown that the information on the costs of bankruptcy pro- ceedings is of key signiﬁcance for the initiation and conduct of a judicial process (e.g., Altman and Hotchkiss 2006; Marsh 2010; Finch 2012; Morawska 2013; Bauer 2013; Prusak et al. 2019; Staszkiewicz and Morawska 2019; Bauer and Hospodka 2020). The signiﬁcance of the bankruptcy proceedings cost estimation stems from the fact that it constitutes high value as compared to the value of the bankrupt’s assets. It has been even ironically referred to as one has to be rich for court to announce bankruptcy (Marsh 2010). This is conﬁrmed by the empirical studies conducted in Poland showing that the cost of a bankruptcy proceed- ings comprise as much as 35% of the bankruptcy estate (Morawska 2013). Conﬁrmation of the role of their calculation is also the standpoint of bankruptcy specialists indicating that the information on the costs of bankruptcy proceedings is of key signiﬁcance for the bankruptcy process. Close to 83% respondents stated that this information is important (Bauer and Hospodka 2020). Another information mentioned in literature as necessary for a bankruptcy proceed- ings is the data on the value of the obligor ’s assets and the correct measurement of the value of assets of companies, for which there is a risk for the continuation of operation or bankruptcy (see i.a. Newton 2010; Altman and Hotchkiss 2006; Bauer 2014; Bauer 2015). Despite the justiﬁed concerns regarding the capacity of an entity to continue its operation, they pursue their business activity, and the users of ﬁnancial statements make business decisions (for example, entrepreneur make decisions on future business opportunities, business partners make decisions on continuing cooperation, courts issue basis for an- nouncing bankruptcy). The role of bankruptcy institution in the reduction of informational asymmetry is strictly related to the information on the assets of the obligor. This should be favored by legal regulations (Smith and Strömberg 2005), which aim at supporting honesty Risks 2021, 9, 64 5 of 18 and discipline in managing the ﬁnances of a bankrupt business (Wessels et al. 2009). From the viewpoint of the risk of bankruptcy process, the information on the valuation of obligor assets is important already at the preliminary stage of the proceedings. It is used as a comparative value for the estimated costs of bankruptcy proceedings. A problematic issue is to select the suitable valuation measure. In the case of judicial bankruptcy proceedings, two measures are used at the same time: book value and estimated commercial (liquidation) value of the assets. There are reservations as to the role of information originating from ﬁnancial statements, because the book value does not fully reﬂect the commercial value of the assets, and it can even markedly differ (Maczy ˛ nska ´ 2009; Bauer 2014; Bauer 2015). Estimated values are also not the perfect measure, because they are not free from the impact of the intention of the person making the estimations. The obligor may manipulate the estimations in order to obtain the expected beneﬁts, e.g. overestimate the estimated assets value in order to exhibit the capacity to cover costs of bankruptcy proceedings (Altman and Hotchkiss 2006). During a research concerning the signiﬁcance of the information on the book value of assets, Polish insolvency specialists have indicated it as important for the transparency of the bankruptcy process (Bauer and Hospodka 2020). Therefore, it appears advisable to use more than one measure of assets value in a bankruptcy process. Using the information concerning bookkeeping valuation requires the knowledge of the methods assumed. The information on the assumed or rejected going concern assumption is the priority information. Although the objective of bankruptcy proceedings is liquidation of the obligor ’s assets and settlement of claims of creditors to the greatest possible extent, the practice of bankruptcy proceedings shows that there are cases where entities while preparing a ﬁnancial statement for the purpose of commencing a bankruptcy proceedings prepare them with the going concern assumption (Górowski 2016, p. 244; Bauer 2016, p. 130). In practice, making the decision on assuming business continuation is not easy. In some cases, it requires the preparation of a multi-annual economic forecasts (Górowski and Kurek 2019, pp. 186–89). However, it is one of the pieces of information expected from the stakeholders of a company undergoing a bankruptcy process (Bauer and Hospodka 2020). The content of the information base for bankruptcy processes is regulated by the provisions of national law. Legal regulations in this ﬁeld are highly diverse. In many coun- tries, the laws oblige the debtor to submit information on the value of assets already upon initiating the bankruptcy proceedings, such as lists of estate assets and claims, sometimes ﬁnancial statements or preliminary valuation of its assets (Smith and Strömberg 2005). The approach of the USA has been indicated as the most detailed one in the ﬁeld of ﬁnancial information. US GAAP represents the most detailed approach to bankruptcy bookkeeping. Also the scientiﬁc studies concerning this topic are much more comprehensive than in other countries (e.g., Newton 2010; Haskin and Haskin 2012). Valuation in liquidation values is indicated in the USA as the correct approach to valuation in terms of bankruptcy. Apart from the information on assets, costs related to sale of assets, as well as the potential revenues and costs which will be booked in the period of judicial proceedings are also calculated (Bauer and Hospodka 2020). Legal regulations concerning the information required for submission in court at the preliminary stage of the proceedings should be considered as rather comprehensive. Apart from the identiﬁcation data of the obligor and their creditors, with the application for bankruptcy, the obligor is obliged to submit the current list of assets, with estimated valuation of their components, as well as a balance sheet prepared by the obligor for the purposes of the proceedings for a day within thirty days prior to the date of submitting the application (The Bankruptcy Law, article 23). In the context of this article, a conclusion arises that from the standpoint of a court, for the aptness of the decision made, both information on the balance sheet value as well as estimated value of the assets is required. Balance sheet further contains bookkeeping data concerning the values of individual liability groups. From the standpoint of a bankruptcy proceeding, the information on the value of the obligor ’s liabilities might be particularly signiﬁcant. Risks 2021, 9, 64 6 of 18 The information provided by the obligor are supplemented upon request of the court by the temporary court supervisor with the information on the ﬁnancial status of the obligor, type and value of their assets, and the expected bankruptcy proceedings costs (The Bankruptcy Law article 38 para. 3). Information on the estimated bankruptcy proceedings costs is a priority for the commencement of bankruptcy proceeding, because if their value is greater than the assets value it forms the basis for rejection of the application for bankruptcy (The Banktuptcy Law 2003, article 13, 38). Therefore, from the viewpoint of bankruptcy law, the correct estimation of bankruptcy proceedings costs and obligor assets value is of key signiﬁcance for restricting the risk of unjustiﬁed commencement of judicial proceedings due to low value of bankruptcy estate. In the context of the above scientiﬁc considerations, as well as analysis of legal regula- tions it has been assumed that information is the key factor favoring minimization of the risk of insolvency proceedings failure, understood as the incapability to cover at least the costs of bankruptcy proceedings. This task is covered by the reduction of the information asymmetry between the stakeholders having access to the complete documentation of the obligor and preparing information for court, and the key stakeholders making decisions in the bankruptcy process, i.e., the judges. 3. Method The empirical data collection process was conducted based on the survey studies, which were participated by 103 specialists in the ﬁeld of insolvency. Another group of respondents comprised of key decision-makers participating in the decision-making process on the commencement or resignation of bankruptcy proceedings. This group included commercial court judges, restructurization advisors, administrative receivers, and certiﬁed auditors. The research sample included: 29 judges conducting bankruptcy proceedings, 12 members of the Minister of Justice Council for the Amendment of Bankruptcy and Reorganisation Law, 96 people who have declared that they have practical experience in bankruptcy pro- ceedings conducted in 2013–2015; 62 of them have declared to also have practical experience in proceedings under the Bankruptcy law that went into effect in 2016. Fifteen respondents indicated double occupational afﬁliation. The sample group includes a large percentage of insolvency judges. According to the data of the Association of Restructuring and Bankruptcy Judges, there are twelve departments in Poland dealing exclusively with bankruptcy cases. There are a total of 87.8 job positions for judges in these departments. In addition, there are eighteen economic departments, which also deal with bankruptcy cases. However, there is no known number of judges who deal with bankruptcy proceedings in these departments. The sample group includes answers of almost 43% of all the members of the Justice Council for the Amendment of the Bankruptcy and Reorganisation Law. The council consists of 28 members (Ministry of Justice 2012). The population size of bankrupt entities, including the number of insolvency special- ists in Poland affects the restrictions concerning the possibility of conducting statistical analysis with division into subgroups of respondents representing speciﬁc professions. Furthermore, an additional issue linked to the distinction of individual respondent groups is the fact that a considerable majority of them declared more than 1 profession (e.g., a judge who is at the same time an academic employee for jurisprudence). Although the study was conducted in one country (in Poland), it has considerably more comprehensive scale than just national. In the era of globalization, the difﬁculties of individual enterprises are transferred between countries, therefore legal regulations in the ﬁeld of bankruptcy may have a considerably greater impact than within one country. Moreover, selection of Poland is valid because this is the country where requirements for documentation submitted at a court are relatively extensive. For example, in Czechia, Risks 2021, 9, 64 7 of 18 which has a similar history of changes after the change from centrally planned economy to market economy, the information base for insolvency processes does not contain any elements of ﬁnancial statement (more on the topic: Bauer and Hospodka 2021). Therefore, results of the presented analysis may constitute a reference point for other countries as well. The study included a series of issues from the ﬁeld of the course of bankruptcy pro- ceeding, however for the purpose of the titled considerations only the questions concerning the assessment of individual information types in the process of making decision on com- mencing bankruptcy proceedings. The empirical research carried out is part of a much broader research project regarding the informational role of accounting in restructuring and insolvency proceedings. The questionnaire contains 149 detailed questions. Three types of information (more on the topic: Bauer and Hospodka 2020) were used for the purpose of an earlier article (which was a starting point for the exploration of the investi- gated problematics) concerning the role of ﬁnancial information in ensuring information transparency of an insolvency proceedings. These questions concerned: The costs of bankruptcy proceedings, The going concern assumption adopted in the ﬁnancial statements, The book value of assets. In the present article, these three questions will be used in a set with ﬁve additional questions in a new context and objective, which is determination of the hierarchy of types of information indicated as signiﬁcant for ensuring informational transparency of a bankruptcy proceeding, and thus minimization of the risk of failure of its conduct. The term of informational transparency of a bankruptcy proceeding, found in publications devoted to the discussed problematics has been ﬁne-tuned as a result of literature study (e.g., Bushman and Smith 2003, p. 76; Bushman et al. 2004; Anctil et al. 2004; Turilli and Floridi 2009, p. 105) and it means the situation when: All stakeholders accept the decision regarding bankruptcy proceedings as a logical consequence of a conﬁdentiality by the court, Based on the information included in the information database of the process, stake- holders who have sufﬁcient economic knowledge are capable of assessing the ﬁnancial standing of the obligor on their own. Questions of the survey were closed, and the used scale of the possible answers had ﬁve levels, where 1 means completely irrelevant information and 5 means crucial information. “I don’t know” or “not applicable” was a possible answer to each question. “I don’t know” means that the respondent does not know the correct answer and resigns from responding on the scale. “Not applicable” means that the respondent did not encounter such a case in his professional practice before, thus he/she is unable to provide answer on the scale. Surveys in which respondents left ﬁelds without any value were also taken into account at the stage of data analysis. The survey contained the following questions: Q1: Please evaluate the signiﬁcance of information on the costs of bankruptcy pro- ceedings for ensuring the informational transparency of bankruptcy proceedings. Q2: Please evaluate the signiﬁcance of information on the assumption adopted in the ﬁnancial statements on the absence of entity’s ability to going concern assumption. Q3: Please evaluate the signiﬁcance of the information on the assets book value. Q4: Please evaluate the signiﬁcance of the information on the course of bankruptcy proceedings. Q5: Please evaluate the signiﬁcance of the information on the estimated net liquidation value. Q6: Please evaluate the signiﬁcance of the information on the book value. Q7: Please evaluate the importance of information from the ﬁnancial statements prepared for a day in a period of 30 days before submitting the application. Q8: Please evaluate the importance of information on the net liquidation value of assets. Risks 2021, 9, 64 8 of 18 The basic thesis assumed in the considerations is the assumption that certain of the typical information used within the framework of bankruptcy proceedings risk is necessary to make the correct decision. This means that ensuring informational transparency is linked to minimizing the risk of bankruptcy proceedings, as it provides the basis for making the correct decision that is pursuant to the provisions of law. Therefore, the following research questions can be formulated: Which of the typical bits of information used within the framework of bankruptcy proceedings risk is necessary to make the correct decision? Of the typical information used as part of the risk assessment of bankruptcy proceed- ings, which are usually taken into account in such a situation, are there elements that are actually unnecessary? Are there any combinations (perhaps an alternative to each other) of correlated types of information that jointly determine the accuracy of assessing the legitimacy for conducting bankruptcy proceeding? Analysis of the contents discussed in the theoretical part of the considerations enables making certain hypotheses, which may aid explaining the investigated problem: H1: Financial information that does not originate from ﬁnancial statements are of key importance for the conduct of a bankruptcy proceedings. H2: Financial information that originates from ﬁnancial statements are signiﬁcant for the conduct of bankruptcy proceedings. H3: Financial information originating and not originating from ﬁnancial statements bear similar signiﬁcance in the opinion of respondents. H4: Information concerning the course of a bankruptcy proceedings is of lower signiﬁcance than ﬁnancial information. Financial information originating from ﬁnancial statements was classiﬁed to those included in questions Q2, Q3, Q6, and Q7. Financial information not originating from ﬁnancial statements was classiﬁed to those included in questions Q1, Q5, and Q8. Question on the information about the course of bankruptcy proceedings is included in Q4. The study applied basic statistical analysis of answers to survey questions, and then the potential scope of correlations between them was analyzed. As shown by the conducted international literature review, the presented study is of precursor nature. Therefore, it is impossible to compare it with results from other countries. However, the concept of bankruptcy proceedings objective (i.e., its efﬁcient conduct, reliable settlement of creditors’ claims) remains universal. Also, the reduction of informational asymmetry and providing for the informational needs of the stakeholders, which may translate into minimized risk of bankruptcy proceedings is of universal nature. The informational needs may differ between countries due to the professional experience of respondents. Therefore, conducting the study in Poland can be viewed as valid, considering the extensiveness of informational requirements in bankruptcy proceedings, and thus the experience of insolvency practitioners utilizing different sources of information is relatively comprehensive. 4. Results The presentation of the research results consists of three parts that are discussed one after another. The ﬁrst describes the results of the basic statistical analysis of each of the three questions. The second section provides a ranking that allows to evaluate the relative importance of each of the three types of information. The third discusses the correlations between the responses given by the respondents to the three consecutive questions. The authors are aware that the 5-point Likert scale indicates the use of an ordinal variable. Therefore, as a part of the analysis, the authors present the distribution of the results as divided into fractions that can be distinguished in the set of answers indicated Risks 2021, 9, x FOR PEER REVIEW 9 of 18 the experience of insolvency practitioners utilizing different sources of information is rel- atively comprehensive. 4. Results The presentation of the research results consists of three parts that are discussed one after another. The first describes the results of the basic statistical analysis of each of the three questions. The second section provides a ranking that allows to evaluate the relative importance of each of the three types of information. The third discusses the correlations between the responses given by the respondents to the three consecutive questions. The authors are aware that the 5-point Likert scale indicates the use of an ordinal variable. Therefore, as a part of the analysis, the authors present the distribution of the Risks 2021, 9, 64 9 of 18 results as divided into fractions that can be distinguished in the set of answers indicated by the respondents (and they use Rho to calculate the correlation). However, due to the possibility of interpretation and synthesis of the results, the authors also use the mean by the respondents (and they use Rho to calculate the correlation). However, due to the value (as a measure of typicality) and standard deviation (which is a synthetic approach possibility of interpretation and synthesis of the results, the authors also use the mean to the differentiation of responses). This is justified due to the fact that the purpose of the value (as a measure of typicality) and standard deviation (which is a synthetic approach analysis is not to study the factors differentiating the opinions of respondents, but the to the differentiation of responses). This is justiﬁed due to the fact that the purpose of purpose is to give a general, relative value to the respective types of information (and, the analysis is not to study the factors differentiating the opinions of respondents, but the consequently, to propose their hierarchical arrangement). Such an approach is acceptable purpose is to give a general, relative value to the respective types of information (and, in the case of scientific analysis of a similar nature. consequently, to propose their hierarchical arrangement). Such an approach is acceptable As for the data characterizing the first question regarding the significance of infor- in the case of scientiﬁc analysis of a similar nature. mation on the costs of bankruptcy proceedings (Figure 1), the most numerous group of As for the data characterizing the ﬁrst question regarding the signiﬁcance of infor- respondents chose the answer indicating value 5—it was 46 individuals. The second most mation on the costs of bankruptcy proceedings (Figure 1), the most numerous group of frequent option—with a result only slightly worse, because it was based on the opinion of respondents chose the answer indicating value 5—it was 46 individuals. The second most 39 individuals out of 103 respondents—was the answer assigned to value 4. The next op- frequent option—with a result only slightly worse, because it was based on the opinion tions were chosen much less frequently: value 3 was chosen by 8 individuals, value 2 was of 39 individuals out of 103 respondents—was the answer assigned to value 4. The next chosen by 5 individuals and the value 1 was chosen by only 1 person. Among other avail- options were chosen much less frequently: value 3 was chosen by 8 individuals, value 2 able options, the answer “I don’t know” appeared once in the survey results, also on one was chosen by 5 individuals and the value 1 was chosen by only 1 person. Among other occasion there was chosen the option “not applicable” and the field was also left blank available options, the answer “I don’t know” appeared once in the survey results, also twice. on one occasion there was chosen the option “not applicable” and the ﬁeld was also left blank twice. Figure 1. Graph of answers to the ﬁrst question regarding the signiﬁcance of information on the costs Figure 1. Graph of answers to the first question regarding the significance of information on the costs of of bankr bank uptcy ruptcy pr proceed oceedings. ings Sour . Sou ce. rce Own . Own stu study d . y. Responses to the second question regarding the signiﬁcance of information on the assumption adopted in the ﬁnancial statements on the absence of entity’s ability to going concern assumption (Figure 2) were clearly dominated by the choice of the option indi- cating the value of 4. This judgment was expressed by 44 respondents. Values 5 and 3 were indicated by a very similar group of individuals, because 23 and 22 respondents, respectively, did so. Only 7 individuals chose the option with a value of 2 and only 2 respondents chose to indicate the value 1. Like in the case with the ﬁrst question, thus so in case of the second question 2 blank ﬁelds were registered. There appeared 1 indication for the answer “does not apply” and twice there appeared “I do not know.” Risks 2021, 9, x FOR PEER REVIEW 10 of 18 Responses to the second question regarding the significance of information on the assumption adopted in the financial statements on the absence of entity’s ability to going concern assumption (Figure 2) were clearly dominated by the choice of the option indi- cating the value of 4. This judgment was expressed by 44 respondents. Values 5 and 3 were indicated by a very similar group of individuals, because 23 and 22 respondents, respectively, did so. Only 7 individuals chose the option with a value of 2 and only 2 respondents chose to indicate the value 1. Like in the case with the first question, thus so in case of the second question 2 blank fields were registered. There appeared 1 indication Risks 2021, 9, 64 10 of 18 for the answer “does not apply” and twice there appeared “I do not know.” Figure 2. Graph of answers to the second question regarding the signiﬁcance of information on the Figure 2. Graph of answers to the second question regarding the significance of information on the assumption adopted in the ﬁnancial statements on the absence of entity’s ability to going concern assumption adopted in the financial statements on the absence of entity's ability to going concern assumption. Source. Own study. assumption. Source. Own study. The answers to the third question regarding the signiﬁcance of the information on the The answers to the third question regarding the significance of the information on assets book value (Figure 3) are the most even, although the dominant value can also be the assets book value (Figure 3) are the most even, although the dominant value can also indicated here. Total of 28 individuals chose the answer to which the value 3 was assigned. be indicated here. Total of 28 individuals chose the answer to which the value 3 was as- The next option in terms of the frequency of occurrence in the survey results—i.e., the value signed. The next option in terms of the frequency of occurrence in the survey results—i.e., 5—was indicated by 24 respondents. About 20 other individuals decided to express their the value 5—was indicated by 24 respondents. About 20 other individuals decided to ex- opinion by choosing value 4. The answer assigned to the value 2 collected 18 responses, press their opinion by choosing value 4. The answer assigned to the value 2 collected 18 Risks 2021, 9, x FOR PEER REVIEW 11 of 18 and the value 1 was selected by 7 respondents. Three individuals answered by choosing the responses, and the value 1 was selected by 7 respondents. Three individuals answered by option “not applicable,” 1 person decided to answer “I don’t know” and 2 other individuals choosing the option “not applicable,” 1 person decided to answer “I don’t know” and 2 left the ﬁeld blank in the questionnaire. other individuals left the field blank in the questionnaire. In case of the fourth question regarding the significance of the information on the course of bankruptcy proceedings (Figure 4), the value of 5 was definitely the most fre- quent (56 individuals selected it). Option 4 was the next most popular one as 37 respond- ents chose it. 6 individuals expressed their assessment pointing to a value of 3. 2 blank fields and 1 “not applicable” and 1 “don’t know” were registered. Nobody indicated the values 1 and 2. The results were clearly focused on the choice between the values 5 (more often) and 4 (slightly less often). The set of answers to the fifth question regarding the significance of the information on the estimated net liquidation value (Figure 5) is very similar to the analogous set char- acterizing question 1. The answer that indicates 5 (45 individuals) is dominant, but the difference, when compared to the indications to value 4, is very small (44 individuals). Against this background, the remaining options are represented to a very limited extent. Figure 3. Graph of answers to the third question regarding the signiﬁcance of the information on the Value 3 was chosen by 9 respondents and one respondent indicated value 2. Nobody de- Figure 3. Graph of answers to the third question regarding the significance of the information on assets book value. Source. Own study. cided to express his assessment with value 1. Additionally, answer “I don’t know” ap- the assets book value. Source. Own study. peared once, the answer “does not apply” also once, and 2 respondents did not give any In case of the fourth question regarding the signiﬁcance of the information on the answers to the fifth question. course of bankruptcy proceedings (Figure 4), the value of 5 was deﬁnitely the most frequent (56 individuals selected it). Option 4 was the next most popular one as 37 respondents chose it. 6 individuals expressed their assessment pointing to a value of 3. 2 blank ﬁelds and 1 “not applicable” and 1 “don’t know” were registered. Nobody indicated the values 1 and 2. The results were clearly focused on the choice between the values 5 (more often) and 4 (slightly less often). Figure 4. Graph of answers to the fourth question regarding the significance of the information on the course of bankruptcy proceedings. Source. Own study. The graph illustrating the responses to the sixth question (Figure 6), regarding the significance of the information on the book value, has a clearly different shape when com- pared with the previous question. The value of 3 dominates in the indications of the re- spondents and this is the result of giving this type of answer by 45 individuals. Total of 19 respondents expressed their opinion by indicating value 4, and the next 18 respondents decided to choose the value 5 option. Value 2 appears 11 times in the set of answers while value 1 appears five times. Two individuals chose the answer “I don’t know,” 1 person indicated the option “not applicable,” twice an empty questionnaire field was registered in relation to question 6. Risks 2021, 9, x FOR PEER REVIEW 11 of 18 Risks 2021, 9, x FOR PEER REVIEW 11 of 18 Figure 3. Graph of answers to the third question regarding the significance of the information on the assets book value. Source. Own study. Figure 3. Graph of answers to the third question regarding the significance of the information on Risks 2021, 9, 64 11 of 18 the assets book value. Source. Own study. Figure 4. Graph of answers to the fourth question regarding the significance of the information on the course of bankruptcy proceedings. Source. Own study. Figure 4. Graph of answers to the fourth question regarding the signiﬁcance of the information on Figure 4. Graph of answers to the fourth question regarding the significance of the information on the course of bankruptcy proceedings. Source. Own study. the course of bankruptcy proceedings. Source. Own study. The graph illustrating the responses to the sixth question (Figure 6), regarding the significance of the information on the book value, has a clearly different shape when com- The set of answers to the ﬁfth question regarding the signiﬁcance of the information The graph illustrating the responses to the sixth question (Figure 6), regarding the pared with the previous question. The value of 3 dominates in the indications of the re- on the estimated net liquidation value (Figure 5) is very similar to the analogous set significance of the information on the book value, has a clearly different shape when com- spondents and this is the result of giving this type of answer by 45 individuals. Total of characterizing question 1. The answer that indicates 5 (45 individuals) is dominant, but pared with the previous question. The value of 3 dominates in the indications of the re- 19 respondents expressed their opinion by indicating value 4, and the next 18 respondents the difference, when compared to the indications to value 4, is very small (44 individuals). spondents and this is the result of giving this type of answer by 45 individuals. Total of decided to choose the value 5 option. Value 2 appears 11 times in the set of answers while Against this background, the remaining options are represented to a very limited extent. 19 respondents expressed their opinion by indicating value 4, and the next 18 respondents value 1 appears five times. Two individuals chose the answer “I don’t know,” 1 person Value 3 was chosen by 9 respondents and one respondent indicated value 2. Nobody decided to choose the value 5 option. Value 2 appears 11 times in the set of answers while indicated the option “not applicable,” twice an empty questionnaire field was registered decided to express his assessment with value 1. Additionally, answer “I don’t know” value 1 appears five times. Two individuals chose the answer “I don’t know,” 1 person in relation to question 6. appeared once, the answer “does not apply” also once, and 2 respondents did not give any indicated the option “not applicable,” twice an empty questionnaire field was registered answers to the ﬁfth question. in relation to question 6. Figure 5. Graph of answers to the ﬁfth question regarding the signiﬁcance of the information on the estimated net liquidation value. Source. Own study. The graph illustrating the responses to the sixth question (Figure 6), regarding the signiﬁcance of the information on the book value, has a clearly different shape when compared with the previous question. The value of 3 dominates in the indications of the respondents and this is the result of giving this type of answer by 45 individuals. Total of 19 respondents expressed their opinion by indicating value 4, and the next 18 respondents decided to choose the value 5 option. Value 2 appears 11 times in the set of answers while value 1 appears ﬁve times. Two individuals chose the answer “I don’t know,” 1 person indicated the option “not applicable,” twice an empty questionnaire ﬁeld was registered in relation to question 6. Risks 2021, 9, x FOR PEER REVIEW 12 of 18 Risks 2021, 9, x FOR PEER REVIEW 12 of 18 Figure 5. Graph of answers to the fifth question regarding the significance of the information on the estimated net liquidation value. Source. Own study. Figure 5. Graph of answers to the fifth question regarding the significance of the information on Risks 2021, 9, 64 12 of 18 the estimated net liquidation value. Source. Own study. Figure 6. Graph of answers to the sixth question regarding the significance of the information on the book value. Source. Own study. Figure 6. Graph of answers to the sixth question regarding the signiﬁcance of the information on the Figure 6. Graph of answers to the sixth question regarding the significance of the information on book value. Source. Own study. the book value. Source. Own study. The seventh question, regarding the importance of information from the financial statements prepared for a day in a period of 30 days before submitting the application, The seventh question, regarding the importance of information from the ﬁnancial The seventh question, regarding the importance of information from the financial has a slightly more flattened distribution of answers than the previous question (Figure statements prepared for a day in a period of 30 days before submitting the application, statements prepared for a day in a period of 30 days before submitting the application, 7). The highest number of indications was recorded with option 4 (37 respondents did so). has a slightly more ﬂattened distribution of answers than the previous question (Figure 7). has a slightly more flattened distribution of answers than the previous question (Figure The value of 3 was the next one, chosen by 30 individuals. On the other hand the answer The highest number of indications was recorded with option 4 (37 respondents did so). 7). The highest number of indications was recorded with option 4 (37 respondents did so). indicating value 5 was given by 21 respondents. Value 2 appeared eight times in the an- The value of 3 was the next one, chosen by 30 individuals. On the other hand the answer The value of 3 was the next one, chosen by 30 individuals. On the other hand the answer swer set and value 1 appeared only once. One person answered by choosing the option “I indicating value 5 was given by 21 respondents. Value 2 appeared eight times in the answer indicating value 5 was given by 21 respondents. Value 2 appeared eight times in the an- don’t know,” 2 individuals chose the option “not applicable,” and 3 persons left the sev- set and value 1 appeared only once. One person answered by choosing the option “I don’t swer set and value 1 appeared only once. One person answered by choosing the option “I enth question without answering. know,” 2 individuals chose the option “not applicable,” and 3 persons left the seventh don’t know,” 2 individuals chose the option “not applicable,” and 3 persons left the sev- question without answering. enth question without answering. Figure 7. Graph of answers to the seventh question regarding the importance of information from Figure 7. Graph of answers to the seventh question regarding the importance of information from the ﬁnancial statements prepared for a day in a period of 30 days before submitting the application. the financial statements prepared for a day in a period of 30 days before submitting the applica- Source. Own study. Figure 7. tion. Sour Graph of answers to the seventh question re ce. Own study. garding the importance of information from the financial statements prepared for a day in a period of 30 days before submitting the applica- The last, eight question regarding the importance of information on the net liquidation tion. Source. Own study. The last, eight question regarding the importance of information on the net liquida- value of assets (Figure 8) is again characterized by a certain shift of the collected answers tion value of assets (Figure 8) is again characterized by a certain shift of the collected an- towards higher values. Option 5 was chosen by the greatest number, as many as 47 The last, eight question regarding the importance of information on the net liquida- swers towards higher values. Option 5 was chosen by the greatest number, as many as 47 respondents. This is even more visible against the background of the next (in terms of tion value of assets (Figure 8) is again characterized by a certain shift of the collected an- respondents. This is even more visible against the background of the next (in terms of frequency of occurrence) value, which is 4 and which was indicated by 37 individuals. swers towards higher values. Option 5 was chosen by the greatest number, as many as 47 frequency of occurrence) value, which is 4 and which was indicated by 37 individuals. About 13 times the value 3 appeared in the set of answers. However, no one decided to respondents. This is even more visible against the background of the next (in terms of About 13 times the value 3 appeared in the set of answers. However, no one decided to choose the options related to the values 1 and 2. The following options: “I don’t know,” “not frequency of occurrence) value, which is 4 and which was indicated by 37 individuals. choose the options related to the values 1 and 2. The following options: “I don’t know,” applicable” or leaving the eighth question unanswered, were selected by two individuals About 13 times the value 3 appeared in the set of answers. However, no one decided to “not applicable” or leaving the eighth question unanswered, were selected by two indi- in each of these three cases. choose the options related to the values 1 and 2. The following options: “I don’t know,” viduals in each of these three cases. “not applicable” or leaving the eighth question unanswered, were selected by two indi- viduals in each of these three cases. Risks 2021, 9, x FOR PEER REVIEW 13 of 18 Risks 2021, 9, 64 13 of 18 Figure 8. Graph of answers to the eighth question regarding the importance of information on the Figure 8. Graph of answers to the eighth question regarding the importance of information on the net liquidation value of assets. Source. Own study. net liquidation value of assets. Source. Own study. The detailed test results presented above have several characteristic properties. The The detailed test results presented above have several characteristic properties. The answers to the fourth question are by far the most concentrated around the right end of answers to the fourth question are by far the most concentrated around the right end of the range that deﬁnes the scope of available values. The calculated mean value of the the range that defines the scope of available values. The calculated mean value of the in- indications in this case is 4.51 (Table 1). A similar phenomenon occurs when the analysis dications in this case is 4.51 (Table 1). A similar phenomenon occurs when the analysis concerns the eighth question (average value at the level of 4.35), the ﬁfth (average value concerns the eighth question (average value at the level of 4.35), the fifth (average value at the level of 4.34) and the ﬁrst one (average value at the level of 4.25). The dependence at the level of 4.34) and the first one (average value at the level of 4.25). The dependence observed here consist in this that the higher the value of the answer, the larger group observed here consist in this that the higher the value of the answer, the larger group of of individuals chose it (although the distance between the option denoting the values 5 individuals chose it (although the distance between the option denoting the values 5 and and 4 in the case of the ﬁrst and ﬁfth questions is not large). In the case of the second 4 in the case of the first and fifth questions is not large). In the case of the second question, question, it is also easy to indicate the dominant option, which was selected by indicating it is also easy to indicate the dominant option, which was selected by indicating the value the value of 4. The value of 4 in the second question deﬁnitely dominates all other in of 4. The value of 4 in the second question definitely dominates all other in terms of fre- terms of frequency of indications. Such a shift of the dominant option toward lower values quency of indications. Such a shift of the dominant option toward lower values results in results in a decrease in the average value, which in the case of summed answers to the a decrease in the average value, which in the case of summed answers to the second ques- second question was only 3.81. The next place in the ranking is occupied by the seventh tion was only 3.81. The next place in the ranking is occupied by the seventh question with question with an average value of 3.71 which precedes the third question (the average an average value of 3.71 which precedes the third question (the average value here is 3.37). value here is 3.37). However, as one can read from the graphic illustration presenting the However, as one can read from the graphic illustration presenting the results of answers results of answers to the third question, there are two vertices of the graph, which is also to the third question, there are two vertices of the graph, which is also the flattest one. The the ﬂattest one. The sixth question is an example of a further shift of the mean value of the sixth question is an example of a further shift of the mean value of the answer toward the answer toward the lower ranges of the set of available options as the mean score was 3.35. lower ranges of the set of available options as the mean score was 3.35. This result is close This result is close to the middle of the range, which includes all available options. This is to the middle of the range, which includes all available options. This is confirmed by the conﬁrmed by the highest frequency of selecting a value of 3. As a result of calculating the highest frequency of selecting a value of 3. As a result of calculating the value of standard value of standard deviations for individual questions of the survey, it can be concluded deviations for individual questions of the survey, it can be concluded that where the mean that where the mean value is higher than 4, the respondents’ answers had to be closer value is higher than 4, the respondents’ answers had to be closer one to another when one to another when compared with other cases. The analysis of the proportion indicator compared with other cases. The analysis of the proportion indicator shows that its values shows that its values only in the case of questions 1.4, 5, 8 reach a level higher than 0.80, only in the case of questions 1.4, 5, 8 reach a level higher than 0.80, while the estimation while the estimation errors associated with this indicator reach a level lower than 0.08 (the errors associated with this indicator reach a level lower than 0.08 (the proportion indicator proportion indicator combines responses indicating either high (4) or crucial (5) importance combines responses indicating either high (4) or crucial (5) importance of information of of information of a given type). This distinguishes the above group consisting of these four a given type). This distinguishes the above group consisting of these four questions from questions from all the other questions included in the survey, for which the proportion all the other questions included in the survey, for which the proportion indicator assumes indicator assumes values lower than 0.66 and the estimation errors related to this indicator valu take es lower values th gr an eater 0.66 than and t 0.09. he estimation errors related to this indicator take values greater than 0.09. Table 1. Basic statistics of the survey questions. Numbers from 1 to 5 in the first column represent answer options (1 means completely irrelevant information and 5 means crucial information). The Proportion Indicator combines responses indicating either high (4) or crucial (5) importance of information of a given type. (Confidence level p = 0.95). Source. Own study. Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Mean Value 4.5 3.81 3.37 4.51 4.34 3.35 3.71 4.35 Risks 2021, 9, 64 14 of 18 Table 1. Basic statistics of the survey questions. Numbers from 1 to 5 in the ﬁrst column represent answer options (1 means completely irrelevant information and 5 means crucial information). The Proportion Indicator combines responses indicating either high (4) or crucial (5) importance of information of a given type. (Conﬁdence level p = 0.95). Source. Own study. Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Mean Value 4.5 3.81 3.37 4.51 4.34 3.35 3.71 4.35 Estimation Error 0.177 0.186 0.247 0.120 0.134 0.210 0.185 0.139 Upper Limit 4.427 3.996 3.617 4.630 4.474 3.560 3.895 4.489 Lower Limit 4.073 3.624 3.123 4.390 4.206 3.140 3.525 4.211 Srandard Deviation 0.88 0.94 1.24 0.61 0.68 1.06 0.93 0.70 1 0.01 0.02 0.07 0.00 0.00 0.05 0.01 0.00 Estimation Error 0.019 0.027 0.049 0.000 0.000 0.042 0.019 0.000 2 0.05 0.07 0.17 0.00 0.01 0.11 0.08 0.00 Estimation Error 0.042 0.049 0.072 0.000 0.019 0.060 0.052 0.000 3 0.08 0.21 0.28 0.06 0.09 0.44 0.29 0.13 Estimation Error 0.052 0.078 0.087 0.046 0.055 0.096 0.087 0.065 4 0.38 0.43 0.19 0.36 0.42 0.18 0.36 0.36 Estimation Error 0.093 0.095 0.076 0.093 0.099 0.074 0.096 0.093 5 0.44 0.22 0.23 0.54 0.44 0.17 0.20 0.45 Estimation Error 0.095 0.080 0.081 0.096 0.096 0.072 0.077 0.096 “I don’t know” 0.01 0.02 0.01 0.01 0.01 0.02 0.01 0.02 Estimation Error 0.019 0.027 0.019 0.019 0.019 0.027 0.019 0.027 “not applicable” 0.01 0.01 0.03 0.01 0.01 0.01 0.02 0.02 Estimation Error 0.019 0.019 0.033 0.019 0.019 0.019 0.027 0.027 “blank space” 0.02 0.02 0.02 0.02 0.02 0.02 0.03 0.02 Estimation Error 0.027 0.027 0.027 0.027 0.027 0.027 0.033 0.027 Proportion Indicator 0.82 0.65 0.42 0.90 0.86 0.35 0.56 0.81 Estimation Error 0.074 0.092 0.095 0.058 0.067 0.092 0.095 0.076 Upper Limit 0.894 0.742 0.515 0.958 0.927 0.442 0.655 0.886 Lower Limit 0.746 0.558 0.325 0.842 0.793 0.258 0.465 0.734 The last issue that needs to be analyzed is the extent of the correlation between the answers given by the respondents to the survey questions (Table 2). In the case of the ﬁrst question, the latter is most strongly correlated with the fourth (correlation at the level of 0.61) and the ﬁfth question (correlation at the level of 0.45). It should be remembered that this is the group of questions that scored the highest average score in the opinion of the respondents (the average value for each of these questions exceeded 4, which happened also only in the eighth question). The second question correlates most strongly with the seventh question (correlation at the level of 0.51). The third question is linked to the sixth question by a correlation at the level of 0.83 and to the seventh question at the level of 0.52. The fourth question is most closely correlated with the ﬁfth (0.51) and eighth (0.52) questions. The ﬁfth question shows the highest correlation with the eighth question (0.70) and then (as already mentioned) with the fourth question. The sixth question (apart from the aforementioned correlation with the third question) shows a notable correlation (0.50) in relation to the seventh question. Thus, the seventh question is most strongly connected with the second (0.51), third (0.52) and sixth (0.50) questions. The eighth question shows the highest correlation with the ﬁfth (0.70) and fourth (0.52) questions. In general, the obtained results are characterized by high statistical signiﬁcance—only in the case of the correlation of the ﬁrst question with the sixth and seventh questions, the probability of an error is signiﬁcantly higher. Risks 2021, 9, 64 15 of 18 Table 2. Correlation table (Spearman’s rank correlation coefﬁcients) between survey questions [* correlation is signiﬁcant at the 0.05 level; ** correlation is signiﬁcant at the 0.01 level; *** correlation is signiﬁcant at the 0.001 level]. Source. Own study. Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q1 1 Q2 0.27 ** 1 Q3 0.23 * 0.35 *** 1 Q4 0.61 *** 0.43 *** 0.39 *** 1 Q5 0.45 *** 0.46 *** 0.29 ** 0.51 *** 1 Q6 0.16 0.40 *** 0.83 *** 0.37 *** 0.39 *** 1 Q7 0.18 0.51 *** 0.52 *** 0.38 *** 0.30 ** 0.50 *** 1 Q8 0.38 *** 0.34 *** 0.40 *** 0.52 *** 0.70 *** 0.47 *** 0.35 *** 1 5. Discussion and Conclusions The discussed study results constitute a continuation of studies concerning the de- mand expressed by specialists in the ﬁeld of insolvency for different types of information, both originating from ﬁnancial statements as well as other sources. A comprehensive anal- ysis aims at explaining the hierarchy of information contained in the bankruptcy process database. This article has focused on the information used at an early stage of bankruptcy process as bearing key signiﬁcance for the minimization of bankruptcy proceedings risk. It was assumed that ensuring informational transparency is linked to minimizing the risk of bankruptcy proceedings, as it provides the basis for making the correct decision that is pursuant to the provisions of law. As a result of the conducted study it was determined that mean evaluations of insol- vency specialists concerning the signiﬁcance of individual types of information are within the range from 3.35 to 4.51, thus all being above the mean value of the assumed scale (3.0). Moreover, the evaluations of information not originating from ﬁnancial statements were higher (from 4.25 to 4.51) than for information originating from ﬁnancial statements (from 3.35 to 3.81). In connection with the above observation, it should be assumed that the hypotheses H1 and H2 were positively veriﬁed. In both cases, the responses are above average. However, as stated in the hypotheses, higher mean values were obtained for ﬁnancial information that did not originate from ﬁnancial statements (questions Q1, Q5, and Q8) than the mean values obtained for ﬁnancial information that originated from ﬁnancial statements (questions Q2, Q3, Q6, and Q7). The H3 hypothesis was veriﬁed negatively since the information that did not originate from ﬁnancial statements had a clearly higher average rating than the information derived from ﬁnancial statements. Re- sults of the study have conﬁrmed the outcomes obtained from the literature review (e.g., Altman and Hotchkiss 2006; Marsh 2010; Finch 2012; Morawska 2013; Bauer 2013; Prusak et al. 2019; Staszkiewicz and Morawska 2019; Bauer and Hospodka 2020), stating that insolvency specialists prioritize the information not originating from ﬁnancial reporting, i.e., information on the costs of bankruptcy proceedings, estimate valuations concerning assets value and commercial values. Insolvency specialists have put the greatest emphasis on the information concerning the course of bankruptcy proceedings, which are attached to judicial acts, both at the preliminary and main stage of bankruptcy proceedings. Therefore, it should be concluded that hypothesis H4 was veriﬁed negatively, which is conﬁrmed by the answers to question Q4. In addition, the general picture presented by the alternative approach that consists in comparing the proportion indicators values which characterize the respective questions in the survey, seems to be fully convergent with the analysis already carried out. This indicator is based on the assumption that, in fact, the opinions of the respondents indicate only the above-average signiﬁcance of a given type of information or the lack of such signiﬁcance. Based on such a simple criterion, it can be concluded that in the set of eight types of information, there occur the differences leading to the conclusions described above. Risks 2021, 9, 64 16 of 18 Correlation between individual types of answers to all indications remained in the range from 0.16 to 0.83. The highest correlation level (0.83) was exhibited by the correlation between the answer concerning importance of the information on the assets book value, and the information on the book value. Such dependence conﬁrms the consistency of the assessments made. But in fact more notable are the correlations which allow two groups of related questions to emerge. The ﬁrst one embraces questions referring to the signiﬁcance of information: on the costs of bankruptcy proceedings, on the course of bankruptcy proceedings, on the estimated net liquidation value, on the net liquidation value of assets. The second group embraces questions referring to the signiﬁcance of information: on the going concern assumption, on the assets book value, on the book value, from the ﬁnancial statements prepared for a day in a period of 30 days before submitting the application. The information database of an insolvency process contains information on book value originating from balance sheet. However, the Polish provisions of law being in effect from 2009 do not order submitting at court the additional information to the ﬁnancial statements—such as the information on the going concern assumption (Bauer and Hospodka 2021). Answers of the respondents may indicate the need of introducing changes to the provisions of law concerning the analyzed types of information. Results of the study are not of a directly applicational character. Its objective was to discover the opinion of the respondents, who have practical or scholar experience, and who often combine theory with practice of bankruptcy proceedings in Poland. Finding out the opinion of the respondents who are stakeholders in bankruptcy proceedings by examining their satisfaction with the information provided aims at determining the usability of individual information types. As pointed out by Maczy ˛ nska ´ (2008), for instance, the bankruptcy diagnosis itself may contribute to the minimization of negative outcomes of the phenomenon. As shown by the literature review, the study presented in the article is of a precursor nature. The aim of the authors is to induce the circles of scientists and practitioners focusing on the problem of bankruptcy to undertake analogous research in other European countries. In particular, the aim is to propose a standard for a research procedure suitable for duplication in other countries, which would allow a comparable diagnosis of the informational needs of stakeholders of bankrupt entities in countries other than Poland. This may positively affect the changes in informational requirements in bankruptcy processes on an international scale. By developing universal standards as a result of the analysis of many cases, it will also be possible to use such knowledge in the work of professions such as an actuary in the future. The knowledge of which information is crucial to take a relevant decision to commence bankruptcy proceedings allows to estimate the consequences of their possible absence, limited scope, ambiguity or low reliability. Therefore, the article constitutes an open discussion, which in effect may lead to the development of a standard objectivizing assessment of bankruptcy proceedings risk, which in times of globalization, seems to be invaluable. The research results contribute to further analyses related to the role of information in the insolvency proceedings. The relatively small population of insolvency specialists in Poland is a limitation to the conducted study. Furthermore, a certain limitation is the lack of accurate data on the size of the population from which respondents representing certain functions in bankruptcy processes originate, e.g., the number of court departments conducting bankruptcy proceedings in Poland. However, no data are available on a speciﬁc number of judges conducting bankruptcy proceedings. It is also problematic for the survey to reach respondents dealing with bankruptcy cases in other countries than the Poland, where the research has been carried out. However, the authors believe that owing to the signiﬁcance of the subject it will contribute to undertaking analogous research in other countries. Studies related to the information used in insolvency processes may contribute to reducing the risk of bankruptcy proceedings and favor efﬁciency of the actions taken. The research will be continued with regards to the methods of information transfer, constituting response to the need of stakeholders of bankrupt enterprises. Risks 2021, 9, 64 17 of 18 Author Contributions: M.B. and K.B. contributed equally to all parts. All authors have read and agreed to the published version of the manuscript. Funding: This research received no external funding. 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Risks – Multidisciplinary Digital Publishing Institute

Published: Apr 1, 2021

Keywords: information management; risk management; bankruptcy proceedings; sustainability

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The Role of Information in Assessing the Risk of Conducting Bankruptcy Proceedings

The Role of Information in Assessing the Risk of Conducting Bankruptcy Proceedings

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The Role of Information in Assessing the Risk of Conducting Bankruptcy Proceedings

The Role of Information in Assessing the Risk of Conducting Bankruptcy Proceedings

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