Analyzing the impact of board vigilance on financial distress through the intervention of leverage structure and interaction of asset tangibility in the non-financial sector of Pakistan

Wen Xuezhou, Rana Yassir Hussain, Haroon Hussain (), Muhammad Saad () and Sikander Ali Qalati ()
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Wen Xuezhou: School of Business, Jiangnan University, Wuxi, Jiangsu Province, P. R. China†School of Management, Jiangsu University, Zhenjiang, Jiangsu Province, P. R. China
Rana Yassir Hussain: ��School of Management, Jiangsu University, Zhenjiang, Jiangsu Province, P. R. China‡Department of Economics and Business Administration, University of Education, Lahore, Pakistan
Haroon Hussain: �Noon Business School, University of Sargodha, Sargodha, Pakistan
Muhammad Saad: �Fast School of Management, National University of Computer and Emerging Sciences, Karachi Campus, Pakistan
Sikander Ali Qalati: ��School of Management, Jiangsu University, Zhenjiang, Jiangsu Province, P. R. China

International Journal of Financial Engineering (IJFE), 2022, vol. 09, issue 02, 1-27

Abstract: This study focuses on the relationship between board vigilance and financial distress in non-financial firms listed on the Pakistan Stock Exchange (PSX). The mediating role of leverage structure and moderating role of asset tangibility is also studied following Baron and Kenney’s approach. The study analyzed the data of 284 firms ranging from 2013 to 2017 by using ordinary least squares (OLS) and panel corrected standard errors (PCSE) regressions. The study revealed that the debt maturity structure mediates the relationship between board independence and financial distress and between CEO non-duality and financial distress but the capital structure did not mediate any of the stated relationships. Similarly, asset tangibility negatively moderated the relationship between debt maturity and financial distress. However, there was no such moderation detected between the relationship of capital structure and financial distress. The results remained consistent throughout the analysis with both regression techniques. These results suggest using more long-term debt in debt maturity structure to have control over financial distress and also to reduce the reliance on non-productive tangible assets in the asset structure of non-financial firms of Pakistan.

Keywords: Board vigilance; financial distress; leverage structure; asset tangibility (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S2424786321500043

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