Measuring Operational Efficiency of Restructured Companies: A DEA-MI Approach

The current study attempts to assess the operational efficiency of the firms restructured to resolve their situation of financial distress. Efficiency evaluation of the firms helps to understand the firm’s performance after it goes through the restructuring process as opposed to liquidation. Thus, it is a measure to validate the decision of the Tribunal to allow the firm to continue as a going concern against liquidation. Malmquist Index, a data envelopment analysis technique, has been utilised to measure the efficiency of firms for three years after restructuring. A study of 40 manufacturing firms reveals that the firms’ efficiency has declined over three years (2017 to 2020) primarily due to the inability of the firms to achieve optimal scale of production. While there has been an improvement in technical efficiency and technological advancement, the overall technical efficiency has been reduced. The study thus provides valuable insights to management and practitioners regarding the areas that require attention post-restructuring and separates performance changes due to other factors like technological advancement or scale efficiencies.