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Does corporate governance quality affect default risk? The role of growth opportunities and stock liquidity

Searat Ali, Benjamin Liu and Jen Je Su

International Review of Economics & Finance, 2018, vol. 58, issue C, 422-448

Abstract: A series of defaults, a distinctive corporate environment and inconclusive findings in literature make Australia an interesting case in which to investigate the association between corporate governance and default risk. Using a large panel of 1086 non-financial firms from 2001 to 2013, we find that better governed firms are strongly associated with a lower level of default risk, and that the association is stronger among firms with more growth opportunities. Moreover, empirical evidence supports the role of stock liquidity as a channel of the relationship. Overall these findings have practical implications for the stakeholders in Australia.

Keywords: Corporate governance; Default risk; Growth opportunities; Stock liquidity; Heterogeneity analysis; Channel (search for similar items in EconPapers)
JEL-codes: G01 G33 G34 G38 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:reveco:v:58:y:2018:i:c:p:422-448