Corporate Governance And Financial Distress Of Listed Non-Financial Institutions In Ghana

Abstract

The study examined the impact of corporate governance on the financial distress of non-financial companies listed on the Ghana Stock Exchange. Studies have shown that the relationship between corporate governance and firm distress is not a new phenomenon, only that the findings have been inconclusive and the inclusion and measurement of variables have also differed. The intuition of this study was to take the most assumed measure of the variables and compare the financial distresses of the non-listed firms listed on the Ghana Stock Exchange. Data for the study was from the Ghana Stock Exchange between 2005 and 2016 and the motivation is based on data availability. The study employed the Random Effect model within the Generalise Least Squares framework. The study revealed that CEO duality was significant and positively associated with financial distress. That is, the more CEOs perform a dual role, the tendency for the firm to be financially distressed. Non-executive directorship was also positive and significant in affecting financial distress of a firm. Ownership (OWNS) was also found to have an adverse effect on distress of a firm and that as firms have more public ownership, the more the firm is likely to fail financially. Finally, firm size and firm distresses are also adversely related. The recommendation is that firms must try to include other non-executive members on their boards in a bid to increase neutrality to the board and also a way of stemming financial distress. Finally, since CEO duality increases the chances of financial distress, firms must do everything practicable to disassociate the role of CEOs from board chairs in order to avoid rift in decision implementations.