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.
