CoChat
Sign Up
Cited by 8Corporate Finance and GovernanceCorporate Insolvency and GovernanceFinancial Distress and Bankruptcy Prediction

The DOI matches its Crossref record.

Financial Distress and Corporate Governance around Lehman Brothers Bankruptcy

Open access
Brédart, Xavier·2014·International Business Research
DOI 10.5539/ibr.v7n5p1
Open this paper in CoChat — free accountOpen PDF

Abstract

United States faced a growing number of corporate bankruptcies during the subprime crisis. This article is intended to determine the effectiveness of some governance mechanisms on the financial distress probability of companies over the period 2007–2009. This period is divided into two parts; we take the date of filing for chapter 11 of the company Lehman Brothers (15 December, 2008) as the cutting point between the mortgage and the financial phases of the crisis. Aiming to highlight the influence of corporate governance mechanisms on financial distress probability, we then use, for each sub period, logit models on paired samples of firms which half opted for legal protection due to financial and commercial difficulties. Our results indicate that, during the first sub period, combining the functions of CEO and chairman of the board of directors is beneficial to the survival of the firm, whereas, during the second sub period, capital ownership by the CEO appears to be an incentive to keep the firm on float. This paper seeks to add to the corporate governance literature by considering how certain corporate governance mechanisms impacted the perennity of companies during the subprime crisis.

Overview

The claims and statistics of this paper haven’t been checked yet.

Run the check — free, no account needed. It reads the open-access text and checks the sources it cites.

A few free checks a day · papers already verified open instantly · results are public

Integrity signals

Registry

Crossref · 10.5539/ibr.v7n5p1

Cites

Statistics

Verification

Claims the paper makes

The claims and statistics of this paper haven’t been checked yet.

Run the check — free, no account needed. It reads the open-access text and checks the sources it cites.

A few free checks a day · papers already verified open instantly · results are public

Claims other papers make about this one

Each is checked against this paper’s own text: does it say what the citing paper says it does?

Self-check

Percentages, sums and reported differences re-computed from the paper’s own numbers.

The self-check needs the paper’s full text.

Citations

Cites

No references could be resolved yet.

Research works printed but not linked: 30

  1. Adams, M., Lin, C., & Zou, H. (2011). Chief executive officer incentives, monitoring and corporate risk management: Evidence from insurance use. The Journal of Risk& Insurance, 78(3), 551-582.
  2. Altman, E. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23(4), 589-609. http://dx.doi.org/10.1111/j.1540-6261.1968.tb00843.x · DOI · Paper page
  3. Beatty, R. P., & Zajac, E. J. (1994). Managerial incentives, monitoring and risk bearing: A study of executive compensation, ownership & board structure in initial public offerings. Administrative Science Quarterly, 39(2), 313-335. http://dx.doi.org/10.2307/2393238 · DOI
  4. Beaver, W. (1967). Financial ratios as predictors of failures. Journal of Accounting Research, Empirical Research in Accounting: Selected Studies, 71-111.
  5. Bhagat, S., & Bolton, B. (2008). Corporate governance and firm performance. Journal of Corporate Finance, 14(3), 257-273. http://dx.doi.org/10.1016/j.jcorpfin.2008.03.006 · DOI
  6. Boyd, B. (1995). CEO Duality and Firm Performance: A Contingency Model. Strategic Management Journal, 16(4), 301-312. http://dx.doi.org/10.1002/smj.4250160404 · DOI
  7. Chaganti, R., Mahajan, V., & Sharma, S. (1985). Corporate board size, composition and corporate failures in retailing industry. Journal of Management Studies, 22(4), 400-417. http://dx.doi.org/10.1111/j.1467-6486.1985.tb00005.x · DOI
  8. Cheng, S. (2008). Board size and the variability of corporate performance. Journal of Financial Economics, 87(1), 157-176. http://dx.doi.org/10.1016/j.jfineco.2006.10.006 · DOI
  9. Conyon, M., Judge, W., & Useem, M. (2011). Corporate governance and the 2008-2009 financial crisis. Corporate Governance: An International Review, 19(5), 399-404. http://dx.doi.org/10.1111/j.1467-8683.2011.00879.x · DOI
  10. Cutting, B., & Kouzmin, A. (2002). Evaluating corporate board cultures and decision making. Corporate Governance, 2(2), 27-45. http://dx.doi.org/10.1108/14720700210430324 · DOI
  11. Daily, C., & Dalton, D. (1994). Corporate governance and the bankrupt firm: an empirical assessment. Strategic Management Journal, 15(8), 643-654. http://dx.doi.org/10.1002/smj.4250150806 · DOI · Paper page
  12. Daily, C. (1996). Governance patterns in bankruptcy reorganizations. Strategic Management Journal, 17(5), 355-375. http://dx.doi.org/10.1002/(SICI)1097-0266(199605)17:5<355::AID-SMJ813>3.0.CO;2-S Daily, C., Dalton, D., Ellestrand, A., & Johnson, J. (1998). Meta-analytic reviews of board composition, leadership structure and financial performance. Strategic Management Journal, 19(3), 269-290. http://dx.doi.org/10.1002/(SICI)1097-0266(199803)19:3<269::AID-SMJ950>3.0.CO;2-K Depret, M. H., Finet, A., Hamdouch, A., Labie, M., Missonier-Piera, F., & Piot, C. (2005). Gouvernement d'entreprise: enjeux managériaux et financiers. Brussels: De Boeck. · DOI
  13. Donoher, W. J. (2004). To file or not to file? Systemic incentives, corporate control, and the bankruptcy decision. Journal of Management, 30(2), 239-262. http://dx.doi.org/10.1016/j.jm.2003.02.003 · DOI
  14. Eisenberg, T., Sundgren, S., Wells, M. (1998). Larger board size and decreasing firm value in small firms. Journal of Financial Economics, 48(1), 35-54. http://dx.doi.org/10.1016/S0304-405X(98)00003-8 · DOI
  15. Gales, L. M., & Kesner, I. F. (1994). An analysis of board of director size and composition in bankrupt organizations. Journal of Business Research, 30(3), 271-282. http://dx.doi.org/10.1016/0148-2963(94)90057-4 · DOI
  16. Hambrick, D., & D'Aveni, R. (1992). Top team deterioration as part of the downward spiral of large corporate bankruptcies. Management Science, 38(10), 1445-1466. http://dx.doi.org/10.1287/mnsc.38.10.1445 · DOI
  17. Jensen, M. (1993). The modern industrial revolution, exit, and the failure of internal control systems. The Journal of Finance, 48(3), 831-880. http://dx.doi.org/10.1111/j.1540-6261.1993.tb04022.x · DOI
  18. Jensen, M., & Meckling, W. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360. http://dx.doi.org/10.1016/0304-405X(76)90026-X · DOI · Paper page
  19. Kiel, G., & Nicholson, G. (2003). Board composition and corporate performance: how the Australian experience informs contrasting theories of corporate governance. Corporate Governance: An International Review, 11, 189-205. http://dx.doi.org/10.1111/1467-8683.00318 · DOI
  20. Lajili, K., & Zeghal, D. (2010) Corporate Governance and Bankruptcy Filing Decisions. Journal of General Management, 35(4), 3-26.
  21. Li, Y., & Zhong, Z. (2013). Investing in chapter 11 stocks: Trading, value, and performance. Journal of Financial Markets, 16, 33-60. http://dx.doi.org/10.1016/j.finmar.2012.09.006 · DOI
  22. Lipton, M., & Lorsch, J. W. (1992). A modest proposal for improved corporate governance. Business Law, 48(1), 59-77.
  23. Ohlson, J. (1980). Financial ratios and the probabilistic prediction of bankruptcy. Journal of Accounting Research, 18(1), 109-131. http://dx.doi.org/10.2307/2490395 · DOI
  24. Pi, L., & Timme, S. (1993). Corporate Control and Bank Efficiency. Journal of Banking & Finance, 20(2/3), 515-530. http://dx.doi.org/10.1016/0378-4266(93)90050-N Platt, H. D., & Platt, M. B. (1991). A note on the use of industry-relative ratios in bankruptcy prediction. Journal of Banking & Finance, 15(6), 1183-1194. http://dx.doi.org/10.1016/0378-4266(91)90057-S Platt, H., & Platt, M. (2012). Corporate board attributes & bankruptcy. Journal of Business Research, 65, 1139-1143. http://dx.doi.org/10.1016/j.jbusres.2011.08.003 · DOI
  25. Premachandra, I. M., Bhabra, G. S., & Sueyoshi, T. (2009). DEA as a tool for bankruptcy assessment: a comparative study with logistic regression technique. European Journal of Operational Research, 193(2), 412-424. http://dx.doi.org/10.1016/j.ejor.2007.11.036 · DOI
  26. Rechner, P., & Dalton, D. R. (1991). CEO Duality and Organizational Performance: A Longitudinal Analysis. Strategic Management Journal, 12(2), 155-161. http://dx.doi.org/10.1002/smj.4250120206 · DOI
  27. Rediker, K. J., & Seth, A. (1995). Boards of directors and substitution effects of alternative governance mechanisms. Strategic Management Journal, 16(2), 85-99. http://dx.doi.org/10.1002/smj.4250160202 · DOI
  28. Refait, C. (2004). La prévision de la faillite fondée sur l'analyse financière de l'entreprise: un état des lieux. Economie & Prévision, 162(1), 129-147.
  29. Weisbach, M. (1988). Outside directors and CEO turnover. Journal of Financial Economics, 20, 431-460. http://dx.doi.org/10.1016/0304-405X(88)90053-0 · DOI
  30. Westphal, J. D., & Zajac, E. J. (1995). Who shall govern? CEO/board power, demographic similarity, and new director selection. Administrative Science Quarterly, 40(1), 60-83. http://dx.doi.org/10.2307/2393700 · DOI

Cited by

Sorted by citations

See all 8

Metadata

Authors
Brédart, X.
Affiliations
University of Mons (BE)
Corresponding author
Brédart, Xavier
ORCID
Brédart, Xavier
Venue
International Business Research
Publisher
Canadian Center of Science and Education
Published
2014-04-25
Volume
7
Issue
5
ISSN
  • 1913-9004 (ISSN-L)
  • 1913-9012
DOI
10.5539/ibr.v7n5p1
OpenAlex
W2021990924
Cited by
8
References
0
Citations by year
2023: 3 · 2022: 2 · 2017: 1 · 2016: 1 · 2015: 1
FWCI
4.05
Type
journal article
Language
en
Open access
Licence
cc-by
Locations
  • International Business Research (publishedVersion, cc-by)
  • ORBi UMONS (submittedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Finance › Corporate Finance and Governance
  • Social Sciences › Law › Corporate Insolvency and Governance
  • Social Sciences › Business, Management and Accounting › Accounting › Financial Distress and Bankruptcy Prediction
Keywords
financial distress, corporate governance, Lehman Brothers bankruptcy, subprime crisis, CEO duality, CEO ownership, business survival, Chapter 11 bankruptcy, board of directors, 2008 financial crisis

About these checks

Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.

Statistics and arithmetic are recomputed, not judged.

Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.

What counts as a claim ›How we measure confidence ›How we check this ›

Are you an author, or do you see a problem with this page? Request a review