ANALYZING BUSINESS VALUATION QUALITY OF DISCLOSURES FOR DISTRESSED ITALIAN COMPANIES. FROM A LEGALLY RESPECTFUL APPROACH TO THE SUSTAINABILITY OF TURNAROUND ASSESSMENT

A crisis constitutes a physiological phenomenon bearing on the evolution dynamics of a company that operates in an overall competitive environment. The economic downturn in recent years and the increased risk for business cycles have made this an increasingly serious and widespread phenomenon in our country. In this context assessment of a company in crisis becomes important for those inside the company who are called to take economic decisions on the organization's future as well as for third parties such as creditors, who have the rights to society. The estimation of a company in difficulty is characterized by greater complexity since the appraiser has to take into account a number of considerations and adjustments to normal operations and procedures performed in the optical evaluation. The report valuation is the moment of synthesis and to the same end as the evaluation and, therefore, it is essential that it is understandable and leaves no scope for misleading or ambiguous interpretations in order to provide useful information to management for the definition of termination mode, able to restore the financial balance and financial company, or to identify the final value of the company attributable profit to potential buyers in the event of disposal. If so, even in normal situations the valuation report must be written in a clear and transparent way, even more so, must be the opportunities for distressed companies on specific aspects. Most of the studies on the issue of quality of valuation reports have tended to focus on the commercial property aspect. The attempt in the present research is to undertake a similar study but with a focus on distressed firms. The main aim of this study is to examine the quality of the valuation report of distressed companies prepared by Italian professional valuers with a view to examining their quality level and locate elements that need to be improved. The valuation reports were found on the web or obtained from experts involved in the operations of distressed firms. The methodology used for the collection of quantitative information needed to test our research hypotheses included the construction of a check list on three levels of information: basic information, specific information and sensitivity analysis. To test our research hypotheses, the check list has been constructed taking into account the International Valuation Standards (IVSC), but also to evaluate decision-making utilities of reports. The results of the research show that the valuation reports reach a minimum level of disclosure, while their content is quite limited on specific items of the report. On the main evaluation choices, research has shown that the experts in the implementation of the evaluation process, albeit with limitations, take into account conditions of crisis in the company. The study contributes, on the one hand, to enriching the analysis conducted on the application of the Italian practice of evaluation methods during "extraordinary events" (distressed firms) and on the other hand, it is, to the best of our knowledge, the first research to investigate the operational context in the evaluation of distressed firms in Italy.