The impact of compliance, board committees and insider CEOs on firm survival during crisis

This study investigates the relationship between internal corporate governance mechanisms and firm survival during a financial crisis. Using a sample of FTSE 350 listed companies for the time period 2003–2010, our results show significant differences in the corporate governance mechanisms of firms that survived and those that failed during the 2007–2009 financial crisis. The findings indicate that compliance with the UK Corporate Governance Code is negatively associated with the survival of firms when they experience exogenous shocks. However, the existence of insider CEOs and a higher number of board committees in organisations increase the chances of survival during an economic downturn. These findings have policy implications and show that non-compliance with a prescribed code of corporate governance does not necessarily lead to poor governance. Moreover, the establishment of extra board committees and CEO succession planning are shown as important dynamics in firms' strategic decisions, as they have implications for the survival of firms during difficult economic conditions.