Corporate Governance Determinants for the Mitigation of the Likelihood of Financial Distress

DOI

10.2991/icbmr-17.2017.1How to use a DOI?

Keywords

financial distress, corporate governance, ownership, audit committee, board of directors, board of commissioners

Abstract

This study aims to examine the effect of corporate governance factors on the likelihood of a company being exposed to financial distress. The factors investigated are the nature of ownership (family or institutional), the proportion of independent directors, and the sizes of the audit committee, board of directors, and board of commissioners. The period studied is 2011 - 2015 using samples of non-financial companies in Indonesia with a total of 190 observations. Data collection is conducted through paired matching, specifically by matching financial report data from 95 observations indicated to experience financial distress with 95 "healthier" observations from the same industry sector, same period, and similar asset size. Binary Logistic Regression is used in this study. The results show that family ownership, the size of the board of directors, the size of the board of commissioners, and the size of the audit committee have significant roles in preventing companies from experiencing financial distress, while institutional ownership and the proportion of independent directors are found to have no effect. Although not all hypotheses are supported in this research, the findings assert the important role played by corporate governance in mitigating the likelihood of financial distress.

Copyright

© 2017, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Hafiz Mahmud Ahmad
AU  - Desi Adhariani
PY  - 2017/11
DA  - 2017/11
TI  - Corporate Governance Determinants for the Mitigation of the Likelihood of Financial Distress
BT  - Proceedings of the International Conference on Business and Management Research (ICBMR 2017)
PB  - Atlantis Press
SP  - 1
EP  - 11
SN  - 2352-5428
UR  - https://doi.org/10.2991/icbmr-17.2017.1
DO  - 10.2991/icbmr-17.2017.1
ID  - Ahmad2017/11
ER  -