In this article, we analyze the relationship between the restructuring decisions of distressed firms and the psychological profile of the manager. We predict that the manager's two psychological attributes, narcissism, and optimism, are negatively associated with the manager’s choice of in-court rather than out-of-court restructuring. On the contrary, we posit that manager emotional stability is positively related to the choice of in-court restructuring. We used an original sample of 230 French SMEs collected via a survey administered directly to managers to test our predictions. Our findings provide a new understanding of choice between in and out-of-court restructuring. Furthermore, we offer theoretical contributions to corporate restructuring, bankruptcy, upper echelons theory, executives personality literatures, and managerial applications for executives and boards of directors.
