Corporate Governance and Firms in Financial Distress: Evidence from a Middle Eastern Country

Charbel Salloum () and Nehme Azoury
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Charbel Salloum: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine
Nehme Azoury: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine

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Abstract: The objective of this paper is to determine the managerial governance characteristics related to financially distress companies. The failure of boards to accomplish their monitoring duties seemed to be one of the main reasons behind the actual financial distress and bankruptcy that swept companies across the planet. Through the analysis of a sample of 178 Lebanese non-listed and family owned firms, the results showed that the boards (that have a higher proportion of outside directors) are less inclined to face financial distress than the boards with a lower proportion. In addition, a different conclusion proves that the board's size and financial distress are directly linked. The paper highlights the extent to which financial distress is associated with corporate governance from a Euro Mediterranean country. It would be a source of education to Lebanese investors, who excessively go for short-term returns, and of help to regulatory authorities in the framework of making policies on corporate governance reformation.

Keywords: Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill G32; Bankruptcy; Liquidation G33; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance G34; Industrialization; Manufacturing and Service Industries; Choice of Technology O14 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (10)

Published in International Journal of Business Governance and Ethics, 2012, 7 (1), pp.1 - 17. ⟨10.1504/IJBGE.2012.046102⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01380791

DOI: 10.1504/IJBGE.2012.046102

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