Corporate Governance as a Tool to Overcome Financial Distress

Authors

  • Vikneswaran Manual
  • Afrah H. Khalfan Al Tawqi

Abstract

Over the history of the corporate world, many corporations have faced financial difficulties and collapses. To today’s date, this problem still occur among firms. Corporate governance is a structure which determine the relationship between corporate direction and performance. Hence, corporate governance studies how a firm can be directed and controlled to enhance its performance and thus avoid financial distress and business failure. Therefore, this project investigates the relationship between corporate governance attributes and financial characteristics to the prediction and resolution of financial distress. A sample of 57 financially distressed firms and 57 healthy firms is examined for 10 countries using logistic regression model. Results from logistic regression suggested that segregation of duty, board composition, ownership structure, and institutional investors were significant determinants to financial distress, while board size, managerial incentive schemes, capital structure, and CEO duality were insignificant predictor variables to financial distress.

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Published

2020-01-06

Issue

Section

Articles