Article2023

The impact of corporate governance mechanisms on corporate failure: an empirical evidence from Palestine Exchange

Abdulnaser Ibrahim Nour · Mohammad Najjar · Saed Al‐Koni · Abullateef Abudiak · Mahmoud Ibrahim Noor · Rani Shahwan

46 citations0/0 files storedJournal of Accounting in Emerging Economies

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

Abstract

Purpose The purpose of this research is to examine the impact of governance mechanisms on corporate failure. Design/methodology/approach This study used a hypothesis-testing research design to collect data from the annual reports of 35 companies listed on Palestine Exchange from 2010 to 2019. Descriptive and inferential statistics were employed, along with correlation analysis to evaluate linear relationships between variables. The variance inflation factor was used to test multicollinearity, and binary logistic regression was utilized to develop the research model. Findings There is a significant positive relationship between board of directors' independency, institutional ownership and the quality of external audit, and corporate failure reduction. No significant relationship has been found among corporate governance variables such as board size, board meetings' frequency, board members' remuneration and audit committee existence, and corporate failure reduction. Research limitations/implications Several empirical research studies have developed models to predict corporate failure using accounting and financial data. However, limited research has empirically investigated the impact of the different mechanisms of governance on corporate failure prediction. Practical implications The research highlighted the significance of companies' commitment to governance principles and their impact on predicting failure. The study suggests that decision-makers and managers can adopt different governance mechanisms to support corporate success and avoid those that may lead to negative consequences and failure. Originality/value This research is the first in Palestine to use a comprehensive list of corporate governance mechanisms to predict the failure of companies listed on the Palestine Stock Exchange between 2010 and 2019.

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References

2007Ownership, two-tier board structure, and the informativeness of earnings – Evidence from China 2017Does institutional ownership influence firm performance? Evidence from China 2015Corporate governance effect on financial distress likelihood: Evidence from Spain 2007Can corporate governance save distressed firms from bankruptcy? An empirical analysis 2014Corporate governance characteristics and default prediction modeling for small enterprises. An empirical analysis of Italian firms 2017Corporate Social Responsibility and Gender Diversity: Insights from Asia Pacific 2002Corporate governance and corporate failure: a survival analysis 2011Corporate board attributes and bankruptcy

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