Stretch or Suppress: Role of Owners and Nominee Directors in Financial Distress

Swechha Chada and Sumit Banerjee

Journal of Emerging Market Finance, 2023, vol. 22, issue 4, 382-408

Abstract: This study investigates the effect of various firm-level corporate governance mechanisms on the likelihood of financial distress in India. We analyze the competing hypotheses of interest alignment and agency theory, examining how controlling shareholders affect the probability of financial distress. Additionally, we assess the potential impact of institutional investor shareholding and bank-appointed directors on the likelihood of financial distress. Our findings suggest that increasing controlling shareholder ownership decreases the probability of distress. However, the effects of institutional investors and bank-appointed directors vary and also depend on the quantum of shareholding of institutional investors and affiliation with business groups. Our results offer insights into improving governance in economies with higher ownership concentration, weaker institutional frameworks, and greater bank participation in credit facilitation. JEL Codes: G32, G33, G34

Keywords: Bank-appointed directors; controlling shareholders; corporate governance; financial distress; institutional investors (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/09726527231183014 (text/html)

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:sae:emffin:v:22:y:2023:i:4:p:382-408

DOI: 10.1177/09726527231183014

Access Statistics for this article

More articles in Journal of Emerging Market Finance from Institute for Financial Management and Research
Bibliographic data for series maintained by SAGE Publications ().