Corporate governance and corporate failure: a survival analysis

Abstract

This study investigates the association of various corporate governance attributes and financial characteristics with the survival likelihood of distressed firms. To address the manner in which firms evolve over time, we employ survival analysis techniques by incorporating Cox Proportional Hazards regressions. We longitudinally track an ex ante sample of 176 financially distressed firms. The results suggest that firms that replaced their CEO with an outsider, were more than twice as likely to experience bankruptcy. Furthermore, larger levels of blockholder and insider ownership over the sample period are positively associated with the likelihood of firm survival.

Systematizing the Empirical Research on Corporate Distress. What Board Features Affect Survival?

“…Thus, three articles out of 11 (27%) observe that CEO turnover has a positive impact on firm survival (Brockmann et al, 2006;Clapham et al, 2005;Davidson III et al, 1993), while one article (9%) finds that it does not (Daily & Dalton, 1995). Seven articles (64%) arrive at no definite conclusions on this research question (Arthaud-Day et al, 2006;Elloumi & Gueyiè, 2001;Gilson, 1990;Gilson & Vetsuypens, 1993;Parker et al, 2002;Perry & Shivdasani, 2005;Schwartz & Menon, 1985). Greening & Johnson, 1996;Johnson et al, 1993) while one article (25%) suggests the opposite (Hambrick & D'Aveni, 1992).…”

“…In the last decade, different research directions also emerged and the relationship between distress and CEO turnover became the topic most often investigated (Arthaud-Day et al, 2006;Brockmann, Hoffman, & Dawley, 2006;Clapham, Schwenk, & Caldwell, 2005;Elloumi & Gueyiè, 2001;Parker, Peters, & Turetsky, 2002). The United States continued to be the most sampled geographical area, but scholars also increased their enquiries within other contexts, such as Europe and Asia.…”

Peran Corporate Governance Dalam Menurunkan Kebangkrutan Pada Perusahaan Di Indonesia

“…Syari (2014), menyatakan tidak terdapat pengaruh antara leverage terhadap kinerja perusahaan. Parker et al (2002), menemukan bahwa leverage secara negatif berhubungan dengan financial distress.…”

“…Ehikoya (2009), meneliti pengaruh antara yang hasilnya melaporkan adanya hubungan positif struktur corporate governance dan kinerja perusahaan dimana struktur kepemilikan yang sangat terkonsentrasi melindungi kepentingan investor dan pemangku kepentingan lainnya. Writh et al (2009), menunjukkan bahwa penerapan good corporate governance secara signifikan dapat meningkatkan return on equity, net profit margin, serta Tobin's Q. Mengenai hubungan antara corporate governance dan financial distress, Parker et al (2002), menemukan bahwa leverage secara negatif berhubungan dengan kecenderungan bangkrut. Parker et al (2002), menyatakan bahwa perusahaan dengan current ratio dan return on sales yang rendah lebih mungkin untuk bangkrut.…”

“…Writh et al (2009), menunjukkan bahwa penerapan good corporate governance secara signifikan dapat meningkatkan return on equity, net profit margin, serta Tobin's Q. Mengenai hubungan antara corporate governance dan financial distress, Parker et al (2002), menemukan bahwa leverage secara negatif berhubungan dengan kecenderungan bangkrut. Parker et al (2002), menyatakan bahwa perusahaan dengan current ratio dan return on sales yang rendah lebih mungkin untuk bangkrut. Menurut Fama dan French (1992), book to market ratio yang tinggi mengilustrasikan sebuah persepsi pasar yang negatif dari prospek perusahaan dan tingkat resiko pasar yang lebih tinggi, secara konsisten meningkatkan kecenderungan bangkrut.…”