Corporate governance and the bankrupt firm: an empirical assessment

The role of directorial board composition and board leadership structure in the bankruptcy of a company is investigated. For the study, data pertaining to firm size, financial control and governance for periods five years and three years before the bankruptcy filing as well as the contemporaneous period are gathered. Financial indicators and firm size are controlled for before logistic regression analysis is performed. Results suggest that governance structures contribute to the incidence of bankruptcy beyond financial and size considerations. In light of the rising occurence of bankruptcy filings, corporations are urged to pay attention to the governance factors related to organizational deterioration and bankruptcy.