Corporate Governance and Firm Survival

Abstract

We explore how various aspects of corporate governance influence the likelihood of a public corporation surviving as a separate public entity, after addressing potential endogeneity that arises from competing corporate exit outcomes: acquisitions, going-private transactions, and bankruptcies. We find that some corporate governance features are more important determinants of the form of a firm's exit than many economic factors that have figured prominently in prior research. We also find evidence that outsider-dominated boards and lower restrictions on internal governance play major roles in the way firms exit public markets, particularly when a firm's industry suffers a negative shock. Overall, our results suggest that failure to recognize competing risks produces biased estimates, resulting in faulty inferences.

Financial Crises and Failed Corporate Governance

“…shareholder governance." 39 Kress further argues, "The directors of the United States' largest financial institutions are too busy to execute their governance roles effectively." 40 Independent directors must be unburdened by excessive other work to create value and promote a safe and sound institution.…”

Understanding firm exit: a systematic literature review

“…They argue that there is a substantial difference between large and small firms in terms of probabilities to exit, because small firms are more likely to operate below the minimum efficient scale and therefore more likely to exit the market. Adopting the perspective that there exists a radical difference in survival probability between small and large firms, due essentially to larger availability of different kinds of resources, we find among our articles those concentrating only on quoted firms (Dawley et al, 2002;Bhattacharjee et al, 2009;Goktan et al, 2018;Ovtchinnikov, 2013), and others only on small firms (Kim et al, 2015;Sakai et al, 2010).…”

“…Other recurrent perspectives were the resource-based view and dynamic capabilities (e.g., Bruyaka & Durand, 2012), resource dependence theory (e.g., Gras & Mendoza-Abarca, 2014), and internationalization theories (e.g., Colantone & Sleuwaegen, 2010). In various instances, scholars preferred to rely on specific exit and survival literature rather than on theories and perspectives (e.g., Goktan et al, 2018). Where possible, we also distinguished papers based on their unit of observation, not surprisingly the vast majority (82) focused on firms (e.g., Bernard et al, 2017;Furr & Kapoor, 2018), 9 on sectors (e.g., Johansson, 2005), and 6 focused on countries, regions, or provinces (e.g., Bosma et al, 2011).…”

Recursos TIC y supervivencia empresarial: una revisión de la noción de ventaja competitiva

“…Algunos trabajos comunican que los desequilibrios financieros son un factor explicativo de la predisposición a aceptar ofertas de absorción: las empresas absorbidas son frecuentemente disfuncionales (Kennedy, 2000), y perciben estos acuerdos como una salida estratégica (Bernile et al, 2012) que evita la quiebra y minimiza el riesgo de que acreedores y propietarios inicien reclamaciones de daños (Rose-Green y Dawkins, 2002). Específicamente, Goktan et al (2018) sugieren que las absorciones y las ofertas públicas de exclusión deben incluirse en la categoría de fracaso. A la vista de todo ello, hemos clasificado a las empresas absorbidas como fallecidas en la fecha en que se adopta el acuerdo de fusión.…”

“…En tanto que intangibles, su identificación objetiva plantea un importante problema experimental (Holsapple y Wu, 2011). Algunos trabajos han explorado distintos aspectos de lo que, en un sentido muy amplio, podemos denominar la calidad de gestión y gobierno corporativos (Goktan et al, 2018). Estas propiedades señalizan buenas prácticas, refuerzan la reputación y mitigan la incertidumbre de los restantes agentes económicos, atenuando el riesgo de que adopten acciones defensivas que, como la adición de primas por riesgo (Deng et al, 2014), la exigencia de colaterales o la denegación de crédito (Klein y Leffler, 1981;Berkowitz y White, 2004), podrían llegar a causar un fallo por sí solas (Lee et al, 2007;Ucbasaran et al, 2013).…”