Critically evaluating the role of HR in supporting a distressed business entity which has undergone a Financial Restructuring Procedure, successfully avoiding Administrative Liquidation Procedure as per bankruptcy law in Saudi Arabia.

Research Background and Focus

In 2018, the Kingdom of Saudi Arabia (KSA, hereinafter the Kingdom) enacted a significant change to bankruptcy legislation intended to provide proactive support to organisations facing the threat of bankruptcy (Alarifi, 2021). In essence, the legislation aims to facilitate conditions for organisational restructuring before the point of crisis is reached. The proposed focus of this research project is to critically evaluate the role of Human Resources (HR) in supporting a financially distressed Saudi organisation seeking to utilise the conditions of the legislation. Of specific interest is evaluating the extent which HR has assisted in the process of restructuring and other supporting activities in order to avoid bankruptcy. The organisation envisaged as forming the case study in question has a full suite HR function. As such, HR intervention would be anticipated as covering manpower efficiency, employee performance, employee motivation, and training and development.

Research Contribution

As changes to bankruptcy legislation in the Kingdom are comparatively recent, (in legal terms), there has been relatively little research which has examined the impact of these significant legislative changes. Furthermore, it is tentatively asserted that there is no existing research which has specifically examined the role of HR in supporting the enactment of the bankruptcy avoidance legislation in this context, meaning that this research would make a significant practical and theoretical contribution. The Covid crisis has thrown many aspects of business into disarray (Greenwood et al., 2020), and as nation-states gradually withdraw financial support packages, it is both likely and understandable that organisations in the Kingdom will need to make use of the legislation. It is therefore also suggested that from a practical standpoint, now would be the ideal time to conduct research of this nature in order to make a meaningful contribution to knowledge.

Proposed Aim and Objectives

The intended aim is to conduct action research within a Saudi Arabian organisation, critically evaluating the role and contribution HR in supporting bankruptcy avoidance measures.

The anticipated objectives of the research are:

  1. To evaluate the ways in which HR can help support bankruptcy avoidance activities within distressed entities in the Kingdom;
  2. To determine what proactive interventions HR should introduce in order to facilitate bankruptcy avoidance and assist with business recovery;
  3. To ascertain generalised transferable HR activities/practices which could be adopted by other organisations in similar situations to help prompt action in the case of bankruptcy in order to mitigate organisational damage.

Indicative Literature

Some literature exists which has examined the impact of bankruptcy on Saudi Arabian firms, but the majority of this has tended to focus on financial and/or accountancy activity. Most notably, examining the issue of bankruptcy through the lens of Sharia finance (Abdulaziz, 1995). Also, the implications of bankruptcy and sustainability within the context of Islamic banking (Jan and Marimuthu, 2015). Other studies such as Parveen and Chikhaoui (2018) and Jan et al., (2019) have sought to establish whether indicators of bankruptcy could have been noted at an earlier stage in business demise based purely on financial activity, and whether executives of organisations could have taken proactive steps to mitigate the impact of bankruptcy or avoided it entirety.

The changes in bankruptcy legislation have been described by Al‐Sarraf (2020) as bringing bankruptcy legislation in the MENA (Middle East and North Africa) region into line with bankruptcy legislation and regulation in more developed economies. Al‐Sarraf (2020, p.159) posited that prior to this change, the effect of Sharia finance on business failure was “punitive”, and was a potential explanation for some of the reluctance of would-be entrepreneurs to launch new business ventures in the Kingdom. This being said, it seems to be the case that there is a gap in the literature which has explicitly sought to measure the relationship between the implementation of the new bankruptcy legislation and corresponding increase in entrepreneurial ventures, although the pandemic might explain this.

Moreover, there does not seem to be any literature at all which has explicitly examined the role of HR in supporting organisational restructure to avert bankruptcy within the context of the Kingdom. Although periodically research literature has signalled that the HR function of an organisation may be aware of the downward spiral of corporate entities, the studies are either old (e.g., Sutton and Callahan, 1987; Hambrick and D’Aveni, 1992), or have been undertaken in other national contexts such as Ji’s (2009) doctoral dissertation which explored the role of HR in supporting organisational turnaround in the US. Or Tyagi (2009), who examined the role of HR in India when supporting organisational recovery in a post-recessionary environment, which is not specifically a bankruptcy environment. One isolated study which has considered the pre-emptive role of HR in organisational demise, that of Ooghe and De Prijcker (2008), concluded that organisational actors and stakeholders do have awareness of impending demise, but whether they are prepared able to act to avert the crisis is less clear.

What can be suggested with some confidence from this indicative review of the literature is that there is certainly scope to explore the under-researched issue of the role of HR in supporting business turnaround in light of new bankruptcy legislation the Kingdom.

Intended Methodology

The intended methodology to be deployed is action research, described by Saunders et al (2019, p.472) as a “research strategy concerning the management of the change and in close collaboration between practitioners and researchers”. It is considered that action research is ideally suited to the research problem which has been identified and described in this proposal, and the nature of a DBA which seeks to actively address a contemporary organisational challenge or problem.

In terms of practicalities, the researcher has access to suitable case study, and has sufficient practical industry experience in the realm of Saudi Arabian law and HR, and is therefore ideally placed to carry out this research project.

From a research strategy perspective, delivery of this research project would result in the utilisation of grounded theory, whereby theory is induced from observations and data gathered from research participants (Anderson, 2019). To conduct a piece of action research it would be envisaged that mixed forms of data would be captured and analysed (Robson and McCartan, 2016) to provide a robust response to the research problem and meet the research objectives as they have been outlined.


Abdulaziz, A.B., 1995. Saudi Arabia-Bankruptcy Protective Settlement Regulations.


accessed 20th Aug 2021.

Alarifi, F., 2021. The bankruptcy law of Saudi Arabia: policy, operation and comparison. PSU Research Review. Ahead-of-Print


accessed 20th Aug 2021.

Al‐Sarraf, A., 2020. Bankruptcy reform in the Middle East and North Africa: Analyzing the new bankruptcy Laws in the UAE, Saudi Arabia, Morocco, Egypt, and Bahrain. International Insolvency Review29(2), pp.159-180.

Anderson, V., 2019. Research Methods in Human Resource Management: Investigating a Business Issue. (4th Ed.). London: CIPD/Kogan Page.

Greenwood, R., Iverson, B. and Thesmar, D., 2020. Sizing up corporate restructuring in the covid crisis (No. w28104). National Bureau of Economic Research.

Hambrick, D.C. and D’Aveni, R.A., 1992. Top team deterioration as part of the downward spiral of large corporate bankruptcies. Management Science38(10), pp.1445-1466.

Jan, A. and Marimuthu, M., 2015. Bankruptcy and Sustainability: A Conceptual Review on Islamic Banking Industry. Global Business & Management Research7(1), pp.109-139.

Jan, A., Marimuthu, M., bin Mohd, M.P., Isa, M. and Shad, M.K., 2019. Bankruptcy forecasting and economic sustainability profile of the market leading islamic banking countries. International Journal of Asian Business and Information Management (IJABIM)10(2), pp.73-90.

Ji, Y.Y., 2009. Uncovering the role of human resource management in organizational turnarounds: Supernumerary or supporting actor? (Doctoral dissertation, University of Kansas).

Ooghe, H. and De Prijcker, S., 2008. Failure processes and causes of company bankruptcy: a typology. Management Decision, 46(2), pp. 223-242.

Parveen, R. and Chikhaoui, E., 2018. Theoretical Framework and Analysis of New Bankruptcy Regulations in Saudi Arabia. International Journal of Applied Economics, Finance and Accounting3(1), pp.10-14.

Robson, C., and McCartan, K., 2016. Real world research. London: John Wiley & Sons.

Saunders, M., Lewis, P., and Thornhill, A., 2019. Research Methods for Business Students. (8th Ed.). Basingstoke: Pearson.

Sutton, R.I. and Callahan, A.L., 1987. The stigma of bankruptcy: Spoiled organizational image and its management. Academy of Management Journal30(3), pp.405-436.

Tyagi, L.K., 2009. Role of Human Resource Management during Global Recession in Indian context. Mangalmay Journal of Management & Technology3(2), pp.26-28.

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