Can corporate governance save distressed firms from bankruptcy? An empirical analysis

Can corporate governance save distressed firms from bankruptcy? An empirical analysis We examine financially distressed firms and document how governance characteristics affect (1) a firm’s ability to avoid bankruptcy and (2) the power of financial/accounting information to predict bankruptcy. Overall, our findings indicate that a distressed firm’s governance characteristics significantly affect its probability of bankruptcy. We find that smaller and more independent boards with a higher ratio of non-inside directors and with larger ownership stakes of inside directors are more effective at avoiding bankruptcy once distress is indicated. These results are consistent with the belief that these types of governance structures induce more effective monitoring. The results are also consistent with the view that the inclusion of governance characteristics enhances the power of financial accounting models in predicting bankruptcy. Review of Quantitative Finance and Accounting Springer Journals

Can corporate governance save distressed firms from bankruptcy? An empirical analysis

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Springer US
Copyright © 2007 by Springer Science+Business Media, LLC
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
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  • Financial ratios, discriminant analysis, and the prediction of corporate bankruptcy
    Altman, EI

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