Voluntary Corporate Governance Structure and Financial Distress: Evidence from Australia

Journal of Contemporary Accounting and Economics, Forthcoming

Posted: 6 Dec 2014

See all articles by Seema Miglani

Seema Miglani

La Trobe University- Department of Accounting

Kamran Ahmed

La Trobe Business School, La Trobe University

Darren Henry

La Trobe University - Department of Economics and Finance; Financial Research Network (FIRN)

Date Written: December 4, 2014

Abstract

We examine the role of voluntary adoption of corporate governance mechanisms in mitigating the financial distress status of firms. Using a sample of 171 financially distressed and 106 healthy listed Australian firms over the five-year period prior to the introduction of the ASX Corporate Governance Council Code in 2003, we find support for the argument that the adoption of certain corporate governance mechanisms is beneficial for firms, as reflected in a reduced likelihood of financial distress. In particular, greater levels of blockholder and director ownership and the existence of a separate audit committee are associated with lower financial distress likelihood. We also find causal evidence that the voluntary adoption of particular corporate governance structures leads to lower levels of financial distress, rather than financial distress recognition leading to corporate governance structural reform.

Keywords: Corporate Governance; Financial Distress; Ownership; Voluntary Adoption; Agency Theory

JEL Classification: G32, G34

Suggested Citation

Miglani, Seema and Ahmed, Kamran and Henry, Darren, Voluntary Corporate Governance Structure and Financial Distress: Evidence from Australia (December 4, 2014). Journal of Contemporary Accounting and Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2534243

Seema Miglani

La Trobe University- Department of Accounting ( email )

Melbourne, VT Victoria 3021
Australia
+61 3 94792683 (Phone)

Kamran Ahmed (Contact Author)

La Trobe Business School, La Trobe University ( email )

Kingsbury Drive
Melbourne, VIC 3086
Australia
0403038387 (Phone)
3105 (Fax)

Darren Henry

La Trobe University - Department of Economics and Finance ( email )

Department of Economics and Finance
La Trobe Business School
Bundoora 3086 Victoria
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
1,668
PlumX Metrics