INTEGRATION OF JUDICIAL AND INSTITUTIONAL RISK INTO THE ECONOMIC MODEL OF ENTERPRISE REORGANIZATION

Abstract

This article examines the theoretical, methodological, and practical foundations for integrating judicial and institutional risk into the economic model of corporate restructuring in the context of the national economy’s volatile development. It is argued that traditional assessments of a company’s ability to restructure—which focus primarily on indicators of liquidity, solvency, debt structure, and projected cash flows—do not fully account for the impact of the legal and institutional environment on the feasibility of implementing a restructuring plan. The economic essence of judicial and institutional risk is defined as the probability of a deterioration in the expected results of rehabilitation due to the unpredictability of law enforcement, procedural delays, conflicting behavior among participants, and restrictions on asset accessibility. The authors propose an original approach to decomposing judicial-institutional risk into the components of legal predictability, temporal stability of the procedure, behavioral conflict, and the legal stability of the enterprise’s asset base. The main channels through which these components influence the value of future cash flows, the resource base for reorganization, transaction costs, and creditor behavior are revealed. A risk-adjusted indicator of restructuring viability has been developed, which allows for correlating the adjusted cash flow with the debt burden and the aggregate risk of the restructuring process. A matrix for assessing judicial and institutional risk has been developed, and stable, tense, and unstable zones for implementing a restructuring scenario have been identified, along with corresponding management responses. The methodological approach to choosing between reorganization and liquidation has been refined by introducing a legal enforceability coefficient, which adjusts the present value of the expected recovery of the enterprise depending on the level of procedural instability. Based on illustrative testing, the paper demonstrates the potential for applying the proposed toolkit to conduct scenario-based assessments of the viability of a reorganization, determine the need to set aside liquidity reserves, strengthen legal protection of assets, and adjust the parameters of a recovery plan. The practical significance of the obtained results lies in their applicability during the development of rehabilitation plans, the evaluation of alternative scenarios for overcoming a crisis, negotiations with creditors, and the establishment of systems for monitoring the rehabilitation process.