The Impact of Corporate Governance Characteristics on the of Financial Distress

Mahdi Filsaraei · Reza Jarrahi Moghaddam

16 citations0/0 files storedInternational Finance and Banking

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Corporate Finance and Governance Corporate Insolvency and Governance Financial Distress and Bankruptcy Prediction

Abstract

Given the importance of corporate governance for increasing the monitoring of company operations, i.e., reducing information asymmetry and increasing control over operations, in this study, we investigate some indicators of corporate governance and financial distress as one of the most important criteria in the decisions of the users of financial statements. Corporate governance Indicators that have been mentioned in this study, including the independence of the board of directors (the ratio of non-executive members), institutional investors and duality of CEO and Chairman of the Board of Directors. This study is applied research and the required information is gathered from financial statements of listed companies on the TSE. Using a sample of 82 company stock during the period 2010-2014 and multivariate regression analysis, the results of the analysis of information gathered indicates that institutional ownership reduces the financial distress. However, there was no significant relationship between board independence (proportion of outside board members) and the duality of CEO and Chairman of the Board with the financial distress. The results also indicate that financial leverage and a qualified audit opinion increases financial distress and firm size and management performance reduces it.

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References

1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1968FINANCIAL RATIOS, DISCRIMINANT ANALYSIS AND THE PREDICTION OF CORPORATE BANKRUPTCY 1996Agency costs of free cash flow, corporate finance, and takeovers 1980Financial Ratios and the Probabilistic Prediction of Bankruptcy 1984Methodological Issues Related to the Estimation of Financial Distress Prediction Models 2007Trading Performance, Disposition Effect, Overconfidence, Representativeness Bias, and Experience of Emerging Market Investors 1971Insurance, Information, and Individual Action 1999The early stages of financial distress

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