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 the 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.

Keywords: Corporate governance, acquisitions, going private, bankruptcy, corporate restructuring

JEL Classification: M40, M48, G33, G34