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Lookup NU author(s): Dr Yousry AhmedORCiD
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND).
In the context of major corporate collapses, executive compensation, board network, gender diversity and oversight committees have all received attention in a package of corporate governance (CG) reforms that were recently issued in the UK. This paper examines whether these reforms of CG can influence the likelihood of corporate failure (CF). It also investigates how efficient they are when CF approaches. After controlling for variables that prior research shows to be related to CF, we find that CF is less likely when a firm is characterized by a lower executive compensation, larger size of the board's social network, and smaller degree of the board's managerial network. However, board gender diversity and independence of oversight committees do not reduce the likelihood of CF. We further observe that the explanatory power of these CG variables is significant but relatively decreased as the time to CF closes. This implies that despite the capability of these variables to render early warning alerts of CF, they are less helpful (efficient) as failure becomes closer. Our results remain robust after a battery of sensitivity tests and addressing potential endogeneity problems. Collectively, the evidence provided by our paper should be of interest to the UK's regulatory bodies (Financial Reporting Council) and legislators (the UK's Parliament), since it shows the practical implications of the UK's CG Code and other governance regulations on reducing future corporate collapses. This paper provides timely evidence-based insights to major recent structural reforms aiming at proposing remedies to CG problems in the UK.
Author(s): Elsayed M, Elshandidy T, Ahmed Y
Publication type: Article
Publication status: Published
Journal: International Review of Financial Analysis
Year: 2022
Volume: 82
Print publication date: 01/07/2022
Online publication date: 22/04/2022
Acceptance date: 19/04/2022
Date deposited: 22/04/2022
ISSN (print): 1057-5219
ISSN (electronic): 1873-8079
Publisher: Elsevier BV
URL: https://doi.org/10.1016/j.irfa.2022.102165
DOI: 10.1016/j.irfa.2022.102165
ePrints DOI: 10.57711/3xsa-wd89
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