The Impact of Good Corporate Governance on Financial Distress in the Consumer Goods Sector

Sri Marti Pramudena ()
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Sri Marti Pramudena: STIE Binaniaga Bogor, Padjadjaran street No. 100 Bogor, West of Java, Indonesia

GATR Journals from Global Academy of Training and Research (GATR) Enterprise

Abstract: Objective � Financial distress is referred to as a condition in which a company's operations result in insufficient funds to meet its obligations (insolvency). The success or failure of a company greatly depends on the corporate governance of the company. This study aims to identify the relationship between the existence of good corporate governance and the probability of financial distress. Methodology/Technique � This study used secondary data obtained from annual reports from 2009 to 2014. The data is gathered from consumer goods manufacturing companies, that are listed on the Indonesian Stock Exchange (BEI). The sample includes 10 companies. The method of analysis used is multiple linear regressions. Findings � The results of the study show that institutional ownership and managerial ownership adversely affect the possibility of financial distress. On the other hand, the proportion of commissioners and the number of board of directors have a positive effect on the probability of financial distress. Novelty � This study found that institutional ownership (IO) has an inverse effect on the financial distress of a company.

Keywords: Good Corporate Governance; Financial Distress; Corporate Performance (search for similar items in EconPapers)
JEL-codes: G30 G34 G39 (search for similar items in EconPapers)
Pages: 10
Date: 2017-12-11
New Economics Papers: this item is included in nep-cfn and nep-sea
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Citations: View citations in EconPapers (1)

Published in Journal of Finance and Banking Review, Volume 2, Issue 4

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