An Empirical Analysis On Effect Of Corporate Governance To Financial Distress

Financial distress has been a hot topic in the economic field. With the continuous expansion of the modern company size, the continuous improvement of the complexity of corporate governance structure, the growing influence on corporate governance, and the causes that the companies to break out financial distress are varied.However,the failure of corporate governance has becoming a fundament reason for financial distress, the financial distress is the weakening of the external governance performance and the ultimate results. The broke out of financial distress not only would jeopardize the enterprise's own survival and development, but also produce a wide range of social impact. Therefore, studying the deep-seated reasons for the outbreak of financial crisis and helping the corporations avoid the financial distress has great practical significance.This paper combines the standardize research and empirical studies, and regards the special treatment as the sign of the listed companies encountering financial distress.And selects more than two consecutive years since 2006 of the special treatment companies as the samples of research, which from the database of CCER.The research bengins with the longitudinal changes between the loss occurred before and after the 3 years of corporate finance and governance information This paper studies the effects of corporate governance on financial distress in ownership structure,board characteristics,and internal audit three aspects.By the method of empirical analysis with EVIEWS, this research also studies the relationship between the change of corporate governance and the change in financial position.The empirical results show that the governance structure of listed companies in China has a certain impact on financial distress.In the ownership structure,the higher the shareholding concentration,the possibility of financial distress that occurred is smaller.The appropriate concentration of equity among shareholders, helps to avoid "free-rider" behavior,can improve the company's internal governance structure and the efficiency of corporate governance,finally to avoid running into financial crisis;On the board characteristics,executive compensation and board size on the occurrence of financial crises have a significant impact, empirical results show that the larger the board, the company more vulnerable to financial crisis, while executive pay increase is conducive to reducing the probability of occurrence of financial crises;On the internal audit,the study found that the establishment of the Audit Committee for the prevention of the outbreak of the financial distress in our country has not yet produced a significant effect.Compared with the previous studies, the main novelty of this article is: in the research perspective this paper abandoned the traditional horizontal pairs, focusing on the perspective from a longitudinal study with a cumulative effect of financial distress resulting from the dynamic change on corporate governance.And then analyzed the role of the deterioration of corporate governance in the process of financial distress. In content, this corporate governance in the past indicators, adding new elements of corporate governance-internal audit, select the Internal Audit in Corporate Governance as a bridge.Audit Committee as an internal audit of the agency variables, examining the establishment of the Audit Commission is able to effectively prevent the company's financial distress. It is expected that the conclusion of the research has significance for people to in-depth understanding of the role of corporate governance and building the effective prevention of enterprise financial distress.