The Corporate Governance And The Indirect Cost Of Financial Distress

This paper investigates how the corporate governance influences the indirect cost of financial distress(ICFD). First of all, I use the method delivered by Opeler and Titman (1994), 8377 samples were selected from all the listed corporations from 1994 to 2005 in Chinese stock market for the study of indirect cost of financial distress. After empirical analysis, I find indirect cost of financial distress exactly exist in Chinese stock market, that means corporate with relative high leverage in distress industry did worse than corporate with relative low leverage. After this, I study how the corporate governance influences the indirect cost of financial distress. I use 106 pairs samples to do empirical analyze ,then find that the ratio of outside director have a negative influence on ICFD, so does the CEO variable, but both of them don't have a low P-Value in statistics. The ratio of manager's stock has a negative influence on ICFD, and has a low P-Value. The first big stockholder and the concentration of the stock have a"U"relation with ICFD. The outside block-holder doesn't influence the ICFD. Whether the corporation is state-owned influence the ICFD remarkably.