Corporate governance and failure risk: evidence from Estonian SME population

Virgo Süsi and Oliver Lukason

Management Research Review, 2019, vol. 42, issue 6, 703-720

Abstract: Purpose - The purpose of this study is to find out how corporate governance is interconnected with failure risk in case of small- and medium-sized enterprises (SMEs). Design/methodology/approach - The study is based on Estonian whole population of SMEs, in total 67,058 observations, and data are obtained from Estonian Business Register. Failure risk (FR) is portrayed with a well-knownAltmanet al.(2017) model, while seven variables reflecting corporate governance (CG) based on previous studies have been selected. As the method, logistic regression (LR) is applied with FR in the binary form as a dependent variable and seven CG variables as independent. The effect of firm size and age is studied with two separate LR models. Findings - The results indicate that with the growth in manager’s age and the presence of managerial ownership, failure risk reduces. In turn, the presence of larger boards and managers having directorships in other firms leads to higher failure risk. Gender heterogeneity in the board, board tenure length and ownership concentration by means of having a majority owner are not associated with failure risk. The obtained results vary with firm size and age. Originality/value - Unlike this study, research published on this topic earlier has used a much narrower definition of failure, mostly focused on large and listed companies, been sample based and information about corporate governance variables has often been obtained through questionnaires. All these limitations are relaxed in this population level study.

Keywords: SMEs; Estonia; Corporate governance; Entrepreneurship and small business management; Private firms; Failure risk (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:mrrpps:mrr-03-2018-0105

DOI: 10.1108/MRR-03-2018-0105

Access Statistics for this article

Management Research Review is currently edited by Dr Jay Janney and Prof Lerong He

More articles in Management Research Review from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().