Bank power, block ownership, boards and financial distress likelihood: An investigation of Spanish listed firms

Mangena, Musa; Priego, Alba María; Lizano, Montserrat Manzaneque

doi:10.1016/j.jcorpfin.2020.101636

Cited by 32 publications

(57 citation statements)

References 100 publications

(296 reference statements)

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“…An alternative measure of bankruptcy risk is financial distress, defined as the ability of the firm to meet its financial obligations (Mangena et al , 2020). Adopting the approach developed by Pindado et al (2008), financial distress is an ex ante measure based on two conditions.…”

Section: Resultsmentioning

confidence: 99%

Business strategy, intellectual capital, firm performance, and bankruptcy risk: evidence from Oman's non-financial sector companies

Dalwai

Salehi

2021

ARA

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PurposeThis research examines the influence of business strategy and intellectual capital on firm performance and bankruptcy risk of Oman's non-financial sector companies.Design/methodology/approachThe data comprises 380 firm-year observations collected from 2015 to 2019 for the non-financial sector companies listed on the Muscat Securities Market. This study measures business strategy using the Miles and Snow typologies and Porter's strategies as alternative measures. The study uses the Granger-causality test to measure the bi-directional causality between independent and dependent variables. The authors use alternative measurements of business strategy and 2SLS/IV estimation to validate the OLS results.FindingsAccording to the Miles and Snow typologies, most of Oman's non-financial firms were analyzers. The empirical results show a negative relationship between business strategy and return on equity (ROE), suggesting defender-type strategy leads to an increase in firm performance. The OLS results show no influence of A-VAIC on firm performance and Altman-Z score. The structural capital efficiency is positively associated with ROA, and Altman Z score consistent with the hypothesized relationship. The Granger causality test shows no inference of causality between any independent and dependent variables except for Z score and CEE.Research limitations/implicationsThe business strategy results from the firm performance and bankruptcy risk models are valuable to the researchers from an emerging market and non-financial companies' perspective. Oman's diversification strategy of its economic activities through non-financial sector companies receives an impetus through the findings of this study. As this study is limited to Oman's non-financial sector companies, future research on business strategy impact can be extended to the financial sector, other GCC, and emerging countries.Originality/valueThe findings of this study contribute to the sparse literature on business strategy in an emerging market like Oman. This study enriches the knowledge of business strategy typologies proposed by Miles and Snow, and Porter. It also contributes to the extant literature on firm performance and bankruptcy risk.

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Section: Resultsmentioning

confidence: 99%

Business strategy, intellectual capital, firm performance, and bankruptcy risk: evidence from Oman's non-financial sector companies

Dalwai

Salehi

2021

ARA

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“…Consistent with the approach used by recent studies (Pindado et al, 2008;Manzaneque et al, 2016b;Mangena et al, 2020), the measurement for financial distress (FD) was calculated as a binary variable that takes the value 1 if the company meets the following conditions and 0 if not: (1) its earnings before interest and taxes depreciation and amortization (EBITDA) are lower than its financial expenses for two consecutive years; (2) a fall in its market value occurs between two consecutive periods 1 . This ex-ante approach is especially advantageous since it allows overcoming problems of the ex-post business failure approaches by considering crisis situations other than bankruptcy (Grice and Dugan, 2001).…”

Section: Dependent Variable: Financial Distressmentioning

confidence: 99%

Does compliance with corporate governance codes help to mitigate financial distress?

Urquiza

Ureba

2021

Research in International Business and Finance

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This paper analyzes whether the compliance with corporate governance codes helps to mitigate the financial distress of firms. We examine three different levels of compliance: overall compliance, the compliance with the recommendations regarding the board of directors and the compliance with the recommendations on board subcommittees. Our results reveal that only the fulfillment with the recommendations about the board of directors leads to a reduction in the likelihood of financial distress. These findings extend the academic debate concerning the role of governance codes and their impact on firm outcomes, and have practical implications for both professionals and firms. Moreover, our findings emphasize the need to distinguish between the different types of recommendations to investigate the effects of these codes. In addition, the results can be useful for policymakers in the configuration of new requirements and recommendations regarding corporate governance structures. Furthermore, our results contribute to the literature, delving into the determinants of the financial distress of firms.

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“…Institutional investors, such as pension funds, mutual funds, and corporations, usually have a greater stake in individual firms, thus increasing their incentives to monitor the top management through an active board chair (e.g., Connelly et al, 2017; Tihanyi et al, 2003). Chairs appointed by the largest shareholders can also bring detrimental effects to firms through their influence over management decisions, as Mangena, Priego, and Manzaneque (2020) reported.…”

Section: Agenda For Future Research On the Role Of The Board Chairmentioning

confidence: 99%

“…Chairs appointed by the largest shareholders can also bring detrimental effects to firms through their influence over management decisions, as Mangena, Priego, and Manzaneque (2020) reported.…”

Section: Ownership Mattersmentioning

confidence: 99%

The role of the board chair—A literature review and suggestions for future research

Banerjee

Nordqvist

Hellerstedt

2020

Corporate Governance

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Research Question/Issue: The role of the board chair has become increasingly complex in recent decades. Research on corporate governance has called for and has initiated the pursuit of more research for the purpose of creating a better understanding of the role of board chairs. We reviewed 234 academic articles published in 66 journals, structured the existing research according to an Input-Process-Outcome-Contexts framework, and provided a future research agenda for studies on the role of the board chair. Research Findings/Insights: Our review reveals that the number of published studies on the position of the board chair has grown over the last two decades. Although extant research is dominated by quantitative studies exploring the impact of the board chair position on financial performance, frequently drawing on agency and stewardship theory, recent work has moved beyond this focus and has added valuable insights. The Input-Process-Outcome-Contexts framework used to structure the extant research reveals that future research should pursue topics related to all components of the framework and that opportunities exist to draw from a broader set of theories. Theoretical/Academic Implications: Based on the framework, we formulate seven specific research topics that can add valuable insights into the role of the board chair and suggest theories that can help inform research pursuing these topics. Taken together, these topics have the potential to create valuable insights into how board chairs are appointed, develop competencies, and interact and work with the CEO, the top management team, the board, and other stakeholders while acknowledging the influence of contextual factors, such as ownership, diversity, the firm's development stage, and external events and trends. Practitioner/Policy Implications: Our review shows a growing global movement toward prescribing more corporate governance regulations and separating the positions of the board chair and the CEO. We show that many aspects need to be considered when choosing a governance configuration and when appointing a board chair because this role is becoming increasingly demanding.

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Bank power, block ownership, boards and financial distress likelihood: An investigation of Spanish listed firms

Cited by 32 publications

References 100 publications

Business strategy, intellectual capital, firm performance, and bankruptcy risk: evidence from Oman's non-financial sector companies

Business strategy, intellectual capital, firm performance, and bankruptcy risk: evidence from Oman's non-financial sector companies

Does compliance with corporate governance codes help to mitigate financial distress?

The role of the board chair—A literature review and suggestions for future research

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