The Impact of Corporate Governance on the Financial Distress: Evidence from Pakistani Listed Companies

Hassan, Jamal, Ahmed; Shah, Syed Zulfiqar Ali

doi:10.53369/kddl1000

Cited by 7 publications

(4 citation statements)

References 3 publications

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“…Therefore, our study found no impact of audit committee independence on the financial distress of a company. The result of the study is consistent with that of Jamal and Shah (2017).…”

Section: Discussionsupporting

confidence: 91%

Corporate Governance as Antecedent of Financial Distress: Case Study of Textile Industry of Pakistan

Hassan Jamal

2024

NBR

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Purpose: The present research studies the effect of corporate governance practices on the level of financial distress of the Textile companies listed at PSX. Design/Methodology: Data from 2019 to 2022 from a sample of 43 companies operating in the weaving, spinning and composite textile industry was assessed in the study. Regression analysis was used to predict the impact of board independence, board size, audit committee independence and duality in the role of CEO and chairman on the financial distress. Findings: The findings reveal that board independence, board size and the duality in the role of Chairman and CEO impacts the financial distress level of the companies and that in companies wherein governance structure is strong, the likelihood of financial distress is lower. However, the effect of Audit committee independence is found to be insignificant in this study. Originality: This study provides support to the companies in understanding the importance of governance structure and its significance in reducing financial distress level. The findings of the study will be of value to the companies operating in textile sector by enabling them to strengthen their governance structure to address the financial distress situation. Further, this study will help the regulators in drafting the governance requirements for the companies and also educating them about the importance of the latter. In future, other studies using different proxies of corporate governance like gender diversity in the board, number of board meetings and characteristics of audit committee may be conducted..

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“…Therefore, our study found no impact of audit committee independence on the financial distress of a company. The result of the study is consistent with that of Jamal and Shah (2017).…”

Section: Discussionsupporting

confidence: 91%

Corporate Governance as Antecedent of Financial Distress: Case Study of Textile Industry of Pakistan

Hassan Jamal

2024

NBR

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“…Many studies have been conducted in the local context to examine the impact of effective governance mechanisms on the likelihood of FD and have concluded that an efficient governance structure not only improves a firm financial performance but also protects it from FD (Jamal and Shah, 2017;Taj et al, 2017;Udin et al, 2017;Khurshid et al, 2018;Khalid et al, 2020;Farooq et al, 2020). Management is expected to use CSR activities to align the interests of various stakeholder groups in an effective governance structure, thereby indirectly protecting the firm from distress.…”

Section: Corporate Social Responsibility Financial Distress and Corpo...mentioning

confidence: 99%

How does corporate social responsibility affect financial distress? The moderating role of corporate governance

Farooq

Noor

Maqbool

2023

SRJ

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Purpose This study aims to investigate the impact of corporate social responsibility (CSR) on the financial distress (FD) of firms listed on the Pakistan Stock Exchange (PSX). Furthermore, the moderating effect of corporate governance (CG) on the CSR–distress relationship is investigated in this study. Design/methodology/approach The final sample of the study includes 117 companies from 2008 to 2021. The sample firms' CSR engagement is assessed using a multidimensional financial approach, and the likelihood of FD is determined using Altman's Z-score. The governance level is measured using the governance index, which includes 29 governance provisions. To achieve the research objectives, the system generalized method of moments estimator is used. Furthermore, several tests are performed to assess the robustness of the study's findings. The analysis was carried out using STATA software version 15. Findings The authors find that CSR is significantly inversely related to FD. The governance mechanism was discovered to be inversely related to FD. Furthermore, corporate governance strengthens the negative relationship between CSR and FD. In addition, the authors find that CSR is significantly inversely related to FD in firms with strong CG mechanisms but has no effect on FD in firms with weak CG mechanisms. Practical implications The findings of this study provide policymakers, business managers, regulators and investors with a better understanding of the relationship between the quality of CSR investments and the likelihood of FD in Pakistani firms, as well as the role of CG in this context. Originality/value This study contributes to our understanding of the role of CG in the CSR-distress relationship in an emerging market. This suggests that policymakers should prioritize CG quality while anticipating the impact of CSR on corporate FD.

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“…Penelitian sebelumnya menemukan independent commissioners berefek negatif dengan financial distress yang dihadapi perusahaan (Fathonah 2016;Pramudena 2017;Hanani and Dharmastuti 2015;Indarti, Widiatmoko, and Pamungkas 2021). Hasil pengujian sebelumnya membuktikan board size berpengaruh positif terhadap financial distress karena jika perusahaan memiliki dewan direksi yang besar, resiko financial distress menjadi tinggi (Younas et al 2021;Guizani and Abdalkrim 2023;Jamal and Shah 2017). Ini menyiratkan bahwa dengan memiliki lebih banyak direktur di dewan, itu dapat menunda proses pengambilan keputusan.…”

Section: Pendahuluanunclassified

“…Semakin banyak pihak yang independen dalam komite, maka tidak akan dapat menciptakan pengawasan lebih optimal. Hasil ini serupa dengan temuan sebelumnya yang menyatakan audit committee independence tidak berpengaruh terhadap financial distress (Gebrayel et al 2018;Jamal and Shah 2017;Ragab and Saleh 2022). Akan tetapi, penelitian ini berbeda dengan hasil temuan lain yang membuktikan audit committee independence berpengaruh terhadap financial distress (Farooq, Noor, and Fatima 2020;Ashraf, Félix, and Serrasqueiro 2021;Yakubu, Abdullahi, and Ibrahim 2020;Khalid et al 2020;Luqman et al 2018).…”

Section: Hasil Uji Tunclassified

Apakah Elemen Corporate Governance Dapat Mengurangi Financial Distress Pada Perusahaan Berisiko Tinggi?

Agustin

Andryanto

2023

JBA

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This study examine the role of Corporate governance (proxied by audit committee independence variables, institutional ownership, independent commissioners, board size) and enterprise risk management in predicting the emergence of corporate financial distress. The research design is quantitative. The research object or population studied is mining companies listed on the Indonesia Stock Exchange (IDX) during the period of 2016-2021. The method used for determining the research sample is purposive sampling, namely determining the sample from the existing population based on predetermined criteria obtaining research sample of 132 observations. All data sets are sourced from the Indonesia Stock Exchange website. This study is employing Panel Regression Analysis including descriptive statistics analysis, correlation, and hypothesis testing using the EViews 12 software. The result posits that institutional ownership has a significant positive effect on financial distress, while the independence of the audit committee, independent commissioners, board size, enterprise risk management do not have a significant impact on financial distress. Further, the control variable of this study, namely company size, has a significant negative effect on financial distress. This study is expected to have significant contribution to Mining enterprise’s stakeholder in examining prominent factors in predicting financial distress.

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The Impact of Corporate Governance on the Financial Distress: Evidence from Pakistani Listed Companies

Cited by 7 publications

References 3 publications

Corporate Governance as Antecedent of Financial Distress: Case Study of Textile Industry of Pakistan

Corporate Governance as Antecedent of Financial Distress: Case Study of Textile Industry of Pakistan

How does corporate social responsibility affect financial distress? The moderating role of corporate governance

Apakah Elemen Corporate Governance Dapat Mengurangi Financial Distress Pada Perusahaan Berisiko Tinggi?

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