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The Impact of Good Corporate Governance on Financial Distress in the Consumer Goods Sector

Author

Listed:
  • Sri Marti Pramudena

    (STIE Binaniaga Bogor, Padjadjaran street No. 100 Bogor, West of Java, Indonesia)

Abstract

Objective � Financial distress is referred to as a condition in which a company's operations result in insufficient funds to meet its obligations (insolvency). The success or failure of a company greatly depends on the corporate governance of the company. This study aims to identify the relationship between the existence of good corporate governance and the probability of financial distress. Methodology/Technique � This study used secondary data obtained from annual reports from 2009 to 2014. The data is gathered from consumer goods manufacturing companies, that are listed on the Indonesian Stock Exchange (BEI). The sample includes 10 companies. The method of analysis used is multiple linear regressions. Findings � The results of the study show that institutional ownership and managerial ownership adversely affect the possibility of financial distress. On the other hand, the proportion of commissioners and the number of board of directors have a positive effect on the probability of financial distress. Novelty � This study found that institutional ownership (IO) has an inverse effect on the financial distress of a company.

Suggested Citation

  • Sri Marti Pramudena, 2017. "The Impact of Good Corporate Governance on Financial Distress in the Consumer Goods Sector," GATR Journals jfbr139, Global Academy of Training and Research (GATR) Enterprise.
    • Handle: RePEc:gtr:gatrjs:jfbr139
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    Cited by:

    1. Balagobei, S, 2022. "Corporate Governance and Financial Distress: Empirical Evidence from listed Consumer Services Firms in Sri Lanka ," GATR Journals afr211, Global Academy of Training and Research (GATR) Enterprise.

    More about this item

    Keywords

    Good Corporate Governance; Financial Distress; Corporate Performance;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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