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Corporate Governance and Firms in Financial Distress: Evidence from a Middle Eastern Country

Author

Listed:
  • Charbel Salloum

    (CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)

  • Nehme Azoury

    (CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)

Abstract

The objective of this paper is to determine the managerial governance characteristics related to financially distress companies. The failure of boards to accomplish their monitoring duties seemed to be one of the main reasons behind the actual financial distress and bankruptcy that swept companies across the planet. Through the analysis of a sample of 178 Lebanese non-listed and family owned firms, the results showed that the boards (that have a higher proportion of outside directors) are less inclined to face financial distress than the boards with a lower proportion. In addition, a different conclusion proves that the board's size and financial distress are directly linked. The paper highlights the extent to which financial distress is associated with corporate governance from a Euro Mediterranean country. It would be a source of education to Lebanese investors, who excessively go for short-term returns, and of help to regulatory authorities in the framework of making policies on corporate governance reformation.

Suggested Citation

  • Charbel Salloum & Nehme Azoury, 2012. "Corporate Governance and Firms in Financial Distress: Evidence from a Middle Eastern Country," Post-Print hal-01380791, HAL.
    • Handle: RePEc:hal:journl:hal-01380791
    DOI: 10.1504/IJBGE.2012.046102
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    Citations

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    Cited by:

    1. Sangeeta Mittal & Lavina, 2018. "Females’ Representation in the Boardroom and Their Impact on Financial Distress: An Evidence from Family Businesses in India," Indian Journal of Corporate Governance, , vol. 11(1), pages 35-44, June.
    2. ElBannan, Mona A., 2017. "Stock market liquidity, family ownership, and capital structure choices in an emerging country," Emerging Markets Review, Elsevier, vol. 33(C), pages 201-231.
    3. Haslinda Yusoff & Faizah Darus & Sharifah Aminah Ab Rahman, 2015. "Do corporate governance mechanisms influence environmental reporting practices? Evidence from an emerging country," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 10(1), pages 76-96.
    4. Ayman Issa & Mohammad A. A. Zaid & Jalal Rajeh Hanaysha, 2022. "Exploring the relationship between female director's profile and sustainability performance: Evidence from the Middle East," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1980-2002, September.
    5. Sattar Khan & Yasir Kamal & Muhammad Abbas & Shahid Hussain, 2022. "Board of directors and earnings manipulation: evidence from regulatory change," Future Business Journal, Springer, vol. 8(1), pages 1-22, December.
    6. Kennedy Mwengei B. Ombaba & David Kosgei, 2017. "Board Composition and Financial Distress of Listed Firms in Kenya. An Empirical Analysis," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 6(4), pages 1-4.
    7. Charbel Salloum & George Jabbour & Jacques Digout & Elias Gebrayel, 2015. "Managerial Dominance over the Board and Audit Committee Independence in Financial Institutions," Post-Print hal-01371710, HAL.
    8. Samara, Georges, 2021. "Family businesses in the Arab Middle East: What do we know and where should we go?," Journal of Family Business Strategy, Elsevier, vol. 12(3).
    9. ElBannan, Mona A., 2021. "On the prediction of financial distress in emerging markets: What matters more? Empirical evidence from Arab spring countries," Emerging Markets Review, Elsevier, vol. 47(C).
    10. ElBannan, Mona A., 2020. "Does catering behavior persist? Evidence on dividend sentiment in emerging financial markets," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 350-373.

    More about this item

    Keywords

    Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill G32; Bankruptcy; Liquidation G33; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance G34; Industrialization; Manufacturing and Service Industries; Choice of Technology O14;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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