Bankruptcy and Corporate Governance: The Impact of Firm Performance and Macroeconomic Factors

37 Pages Posted: 31 May 2019

See all articles by Amr Fahmi Omar Faqera

Amr Fahmi Omar Faqera

Universiti Utara Malaysia - School of Economics, Finance and Banking

Date Written: May 9, 2019

Abstract

Corporate governance issues have been having the share of attention from researchers for over three decades owing to the increasing of global economic crisis. Miss management and less practice of corporate governance can cause by both internal and external factors, which is probably due to the inefficient management or breakdowns in internal procedures, human errors and systems failures. It is important for an organization to practice of corporate governance efficiently to avoid the fall of corporate governance and run the company in the best way. The collapse of Northern Rock in 2008 was the first major run on a UK retail bank since 1866. This study addresses the case of Northern Rock bank fraudulent accounting in 2008 and examines its implications for setting accounting standards while considering the linkage between theory and practice, also, this study aims to investigate the influence of the elements of corporate governance factors and macro-economic factors affecting the performance of elements of corporate governance before the scandal years and after scandal years in Northern Rock bank among five years. Moreover, this study used Z-Score bankruptcy model, return on asset and return on equity as control variables. Based on the statistical results, the descriptive statistics illustration that the overall average return on asset (ROA) of the company is high negative with score of -17%. This helps as a benchmark and indicates that Northern Rock bank on average -17% of less profit specially after scandal year. On the other hands, there is a positively significant influenced between Altman Z and equity performance (ROE). Overall, the lower the score, the higher the risk of bankruptcy. For instance, a Z-Score above 0.001 shows financial soundness; underneath 0.10 recommends a high probability of failure.

Keywords: corporate governance, firm performance, Altman Z, ROA, ROE

JEL Classification: G3, G32

Suggested Citation

Faqera, Amr Fahmi Omar, Bankruptcy and Corporate Governance: The Impact of Firm Performance and Macroeconomic Factors (May 9, 2019). Available at SSRN: https://ssrn.com/abstract=3385290 or http://dx.doi.org/10.2139/ssrn.3385290

Amr Fahmi Omar Faqera (Contact Author)

Universiti Utara Malaysia - School of Economics, Finance and Banking ( email )

Sintok, Sintok 06010
Malaysia

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