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Financial distress and corporate governance: an empirical analysis

Fathi Elloumi (Fathi Elloumi is an Assistant Professor of Accounting at Athabasca University, Alberta, Canada. He received his PhD degree in business administration from the University of Quebec at Montreal, Quebec, Canada. His research interests include earnings management, compensation, supply chain management, strategic decision process, corporate governance, and the dynamics of bankruptcy and business failure.)
Jean‐Pierre Gueyié (Jean‐Pierre Gueyié is an Assistant Professor of Finance at the University of Quebec at Montreal. He received his PhD degree in business administration from Laval University, Quebec, Canada. His research interests include banking, risk management, corporate governance, and the dynamics of bankruptcy and business failure.)

Corporate Governance

ISSN: 1472-0701

Article publication date: 1 March 2001

12644

Abstract

Relationships between corporate governance characteristics and financial distress status are examined for a sample of Canadian firms. Results from logit regression analysis of 46 financially distressed and 46 healthy firms lead us to conclude that the board of director’s composition explains financial distress, beyond an exclusive reliance on financial indicators. Additionally, supplemental results indicate that outside directors’ ownership and directorship affect the likelihood of financial distress. Furthermore, splitting financially distressed firms based on chief executive officer change as a proxy of turnaround strategies provides useful insights on corporate governance characteristics in financial distress.

Keywords

Citation

Elloumi, F. and Gueyié, J. (2001), "Financial distress and corporate governance: an empirical analysis", Corporate Governance, Vol. 1 No. 1, pp. 15-23. https://doi.org/10.1108/14720700110389548

Publisher

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MCB UP Ltd

Copyright © 2001, MCB UP Limited

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