Research On Corporate Governance And Financial Distress Cost

In recent years, the trend of economic globalization is more and more obvious; the worldwide market competition is becoming increasingly fierce. In the global, troubled or bankrupt companies have been the number increased significantly; many powerful international companies are also in trouble, which had a huge impact on the economic development of countries. Thus, financial distress and related issues became the focus of attention now. As the world's fastest growing countries, China should not underestimate the problem naturally. Since 1998, our country implemented the ST system in Shanghai and Shenzhen listed companies, the number of ST companies was increasing, to a certain extent, indicated that companies had been in financial difficulties. Therefore, it is very necessary to research the financial difficulties and related issues of them.Focus of this study is to examine the impact of factors of financial distress costs from the perspective of corporate governance. This paper is divided into three parts. First, a brief introduction to this research background, ideas and methods, and then review the situation at home and abroad study; Secondly, make a logical deduction to the formation process of the financial distress costs, while theoretical analysis what kind of impact the overall corporate governance would on the financial distress costs; The third part, use the empirical methods to analyze the relationship between the cost of financial distress and corporate governance.This paper selects the period 2005-2009 in Shanghai and Shenzhen A shares of companies in financial difficulties as the research object, and conducts the regression analysis. The results show that ownership concentration, the state-owned holding, the proportion of independent directors, executives leaving and financial distress costs significantly negative correlation. The equity balance degree and the cost of financial distress was a significant positive correlation. Based on the above results, we suggest that the companies should increase the plight of corporate ownership concentration and the proportion of independent directors, "no act"and other executives should be replaced as soon as possible. By constructing rational and efficient corporate governance structure, improve the plight of the financial position and reduce the costs of financial distress.