Corporate governance and financial distress: An empirical analysis. The case of Thai financial institutions.

摘要

This study is built upon the existing literatures on corporate governance and bankruptcy prediction. The impacts of concentrated ownership, board of director characteristics, and managerial ownership on the probability of financial distress are examined. Based on the previous literature conceptualized by agency theory, concentrated ownership, board of directors, and managerial ownership is hypothesized to have an impact on the probability of financial distress.; Although researchers have accumulated a large body of literature that provides theoretical analysis and empirical evidence for the concentrated ownership and corporate governance mechanisms and their impact on firm value, most studies underlining the topic are based on the sample of non-financial firms or of U.S. environment. The 1997 financial crisis in Thailand provides the opportunity to expand the research horizon to include observations of financial firms and examine the existing ownership structure and corporate governance theory from an international perspective.; The evidence supports the hypothesis that managerial ownership in banking industry is not a tool to ameliorate the agency problem by way of interest-alignment between management and shareholders. This may instead be a potential tool to facilitate managerial entrenchment, which worsens the agency problems. Nevertheless, mechanisms, such as the independence of board of directors, may effectively monitor the managers and reduce the agency costs.; The finding indicates that besides the financial characteristics, corporate governance contains information relevant to corporate failure. The probability of financial distress, corporate governance, and financial characteristics are associated. Therefore, an early warning system cannot be complete without incorporating the corporate governance characteristics.