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

Ever since the Asian finance crisis happened in 1990s,corporate govemance,especially the insider control,causes lots of attention.The weakness of corporate internal structure not only leads many companies to bankruptcy,but also has influence on the industry structure.The board is an important part of corporate governance.It builds the CEO's game rules, employment and fire,the rewards and operating information.If the company is in financial distress,the board has the important responsibility.Especially in our country,the history of market economy is relatively short;the planning economy still has lots of influence on our companies.As a new mechanism of corporate governance,the board still doesn't exert its functions.Our companies have lots of problems,such as the independency of the board,the function and the structure.So this study wants to find the reasons of financial distress from the board characters.Also we want to improve the board governance and provide some suggestions to the governing.In according to the concept of financial distress and the principals of industry pairing,this study chooses 92 ST,PT listed companies and 92 matching sampled companies from the Shanghai Stock Exchange and the Shenzhen Stock Exchange.After using the t-test and Logistic regression analysis,we investigated the following aspects:the number of the board and the frequency of the board meeting have a significant positive relationship with the probability of financial distress.The independency of the board and the CEO having lower percentage of equity ownership has a significant negative relationship with the probability of financial distress.But the dual of chairman and CEO has an insignificant relationship with the probability of financial distress.So we think keeping a suitable board,improving the quality of the board,increasing the number of independent board members and the ownership of equity will decrease the probability of financial distress.In our country,the dual of chairman and CEO will improve the performance of the company and decrease the probability of financial distress.