Catherine M. Daily, Dan R. Dalton, "Corporate governance and the bankrupt firm: an empirical assessment", 1994

Résumé du document

Porter noted that "the reason why firms succeed or fail is perhaps the central question in strategy". We would argue that corporate bankruptcy is a particularly important context for examining strategic management. Do board composition and board leadership structure impact firm bankruptcy? The two most accurate aspects of corporate governance which impact firm bankruptcy are the composition of the board of directors (independent vs. interdependent) and the board leadership structure (CEO vs. board chairperson position). There should be greater proportions of independent directors, and one person should not occupy the positions of CEO and board chairperson. We can enlist some conditions for an efficient board of directors.

Extraits

[...] Then, he uses Ward's Business Directory of US Private & Public Companies to match a survivor firm relying on three control variables: standard industrial classification code, total sales volume, and number of employees for the year 1990. Regarding the variables used to assess a company's probability to go bankrupt - The bankruptcy variable must be used the year of the bankruptcy - Financial indicators also called control variables : . Profitability . Liquidity . Leverage . Measure of unabsorbed slack ( working capital as a percent of sales) . [...]

[...] (Cameron, Kim and Whetten 1987, Marcus and Goodman 1991). Therefore, the more the authority is centralized, the more complicated it is for an organization to adapt to a changing environment, and to figure relevant solutions during crisis periods. Organizational Turnaround During crisis periods, management should be removed, however, if the CEO is also chairman of the board, this won't happen. Agency Perspective It is a self-serving behavior, i.e. board chairperson would not critic the CEO to keep his position, even if it goes against shareholders' interests. [...]

[...] Dalton, "Corporate governance and the bankrupt firm: an empirical assessment" Porter noted that "the reason why firms succeed or fail is perhaps the central question in strategy». We would argue, then, that corporate bankruptcy is a particularly important context for examining strategic management. Main issue of this article Do board composition and board leadership structure impact firm bankruptcy? Thesis of the authors Main point The two most accurate aspects of corporate governance which impacts on firm bankruptcy are the composition of the board of directors (independent vs interdependent) and the board leadership structure (CEO vs board chairperson position). [...]

[...] o On the other hand, in the same period, Williamson, Anthony and Anderson support the CEO duality and the fact that board are mostly composed of insiders. o o There is an empirical support for the positive impact of the independent leadership structure (Malette and Fowler 1992). Separating the positions of CEO and board chairperson is associated to a decreased incidence of poison pill adoption and higher accounting returns. Contribution of this article o A review of the relevant strategic, finance, accounting, legal, and economics literatures led us to agree with Hambrick and D'Aveni (1988) that large-scale corporate decline and bankruptcy is a relatively unexplored domain. [...]

[...] The firm size - Three governance variables : . CEO / board chair structures . Independent / interdependent directors distinction . Propention of independent director Directors of the board are said to be independent, if they have no links with the CEO. For example, their appointment must have taken place before the current CEO's appointment. On the contrary, they are said to be interdependent if they are classified as insiders to the firm or outsider, who have been appointed by the current CEO. [...]