IBBI Releases IIM Ahmedabad Study: IBC Resolution Drives Strong Post-Resolution Revival Across Key Financial Metrics

The Insolvency and Bankruptcy Board of India (IBBI) has released a research study conducted by the Indian Institute of Management Ahmedabad assessing the effectiveness of the resolution process under the Insolvency and Bankruptcy Code, 2016 (IBC). The study evaluates post-resolution performance of 1,194 firms and extends prior analysis up to 2025. The study finds a significant improvement in operational and financial indicators of firms undergoing resolution. Average sales of resolved firms increased by 89% within five years of resolution, indicating strong business recovery. Asset utilisation also improved substantially, with the asset turnover ratio rising by approximately 131% over the same period.

Capital expenditure witnessed a notable increase of about 106% post-resolution, reflecting renewed investment activity and improved economic viability. The average asset base of these firms grew from ₹228.33 crore in the year of resolution to ₹254.60 crore after five years, marking an increase of approximately 11.5%. Employment-related indicators also showed upward movement. Average employee expenses rose by nearly 71.91%, while employee strength relative to total assets increased by around 200%, suggesting expansion in workforce intensity following resolution.

Market-linked indicators recorded a sharp recovery. The aggregate market capitalisation of resolved firms increased from approximately ₹2.8 lakh crore to ₹9 lakh crore over five years, reflecting improved investor confidence and valuation recovery. Liquidity levels strengthened significantly, with an increase of around 106% in the five-year post-resolution period, indicating enhanced financial stability and short-term solvency.

Legal Analysis

The study underscores the effectiveness of the resolution framework under the IBC in restoring the financial and operational health of distressed firms. The empirical findings demonstrate that resolution under the Code is associated with sustained improvements across multiple performance indicators, including revenue generation, asset efficiency, investment activity, and financial resilience. The observed trends indicate that the resolution mechanism facilitates not only immediate debt restructuring but also long-term revival of business operations. The consistent improvement in liquidity and capital expenditure highlights the ability of resolved firms to regain access to financial resources and undertake growth-oriented investments.

Further, the increase in market capitalisation and investor confidence suggests that successful resolution outcomes contribute to broader market stability and credibility of the insolvency framework. The expansion in employment metrics reflects the potential of the resolution process to support economic activity beyond financial restructuring.