Internal governance mechanism and default probability: evidence from US public firms

Samira Lehlou, Imen Tebourbi and Lobna Bouslimi

International Journal of Corporate Governance, 2014, vol. 5, issue 1/2, 83-102

Abstract: Using a sample of US public firms, we examine the role of different internal corporate governance mechanisms in predicting the probability of default. We build a model that integrates financial ratios and corporate governance-related variables to predict the probability of default and find that board of directors-related variables increase the power of the model to predict the default probability. Our results suggest that firms with larger boards and CEOs performing multiple functions within their corporations are associated with lower default probability. However, CEO-chairman duality and the number of internal directors increase the credit risk. Our parsimonious model also shows the importance of board of directors' characteristics for predicting the probability of default in public firms.

Keywords: default probability; corporate governance; public firms; board of directors; internal governance; USA; United States; financial ratios; modelling. (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.inderscience.com/link.php?id=62351 (text/html)
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:ids:ijcgov:v:5:y:2014:i:1/2:p:83-102

Access Statistics for this article

More articles in International Journal of Corporate Governance from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().