Corporate turnaround and financial distress

Purpose Drawing on variables cited in the turnaround literature, this study aims to explore whether information contained within annual reports is useful in distinguishing between distressed companies that enact a turnaround and those that fail. Design/methodology/approach This study develops a discriminant model to identify distressed companies that have turnaround potential. Findings Analysis of the results reveals that successful turnarounds are associated with the severity of the distressed state, its determinants, with the extent of change in the distressed state since the previous year, and firm size. Originality/value This article is of use in identifying what information is useful in annual reports.