The Empirical Research On The Relationship Of Financial Distress And Corporate Governance

With the rapid development of the security market in recent years, listed companies have increased greatly, but at the same time more and more listed companies run into financial distress. Financial distress brings great losses not only to the shareholders and creditors, but also to the society. So it's of significance to study the reasons how financial distress comes into being and to control the financial distress.As beginning, the article defines the concept of financial distress and studies the reasons why the listed companies get into financial distress, the inefficiency of corporate governance is perhaps a deep-seated reason. There for our study focus on corporate governance. We analyze the reasons of financial distress from two aspects that are the ownership structure and the board structure and put forward eight related assumptions. Then we consider the preceding three years data of 113 ST companies and matched 113 non-ST companies as the research objects and choose the proportion of state-ownered stocks,the proportion of corporation ownership,ownership concentration,the proportion of director ownership,size of the board,the proportion of independent directors,the frequency of board meetings and CEO duality as independent variables to built a Logit regression model. Our research indicates that the proportion of state-ownered stocks,the proportion of corporation ownership and the proportion of director ownership have no remarkable relationship with financial distress; ownership concentration and the proportion of independent directors are negatively related to the financial distress; while size of the board,the frequency of board meetings and CEO duality are positively related to the financial distress. Finally, we check up the model with statistical measure and the result is much perfect, so the model has a strong explanation. So we find the ownership structure has no remarkable relation with financial distress, while the board structure is related to the financial distress obviously.Based on the above empirical study and the actual circumstance of the listed companies, the article provides some advices about corporate governance.