The Big Bath

When there is a change in the top management of a company, there is often a phenomenon known in the English-speaking world as Big Bath. In this case, an already weak annual result is artificially further worsened by writing off assets, selling subsidiaries below their book value or forming massive provisions.

This behaviour of decision-makers is rational in the light of existing incentives. For investors, however, a big bath can temporarily lead to considerable losses.

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