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207373

The impact of board of directors’ characteristics on financial distress: Empirical evidence from Egypt using logit and discriminant analysis models.

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Last updated: 22 Jan 2023

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Abstract

Purpose: This paper aims at investigating financial distress and explore the nature of the relationship between board of director's characteristics and financial distress in the Egyptian economy from 2015-2018. Design /methodology / approach: To determine the best suitable model to express data, two models were employed in this research. The first model is multivariate discriminant analysis model introduced by Altman and Hotchkiss (2010) and logit model. Findings:  Our results suggest that the proportion of independent directors and CEO duality are found to be significant determinants for financial distress. However, board size is not a significant variable in predicting financial distress. These results have been confirmed using logistic model. On the other hand, discriminant model reveals that all the explanatory variables are significant in explaining financial distress. Increasing board size increases the probability of financial distress while CEO duality and board independence have a positive impact on financial distress probability. Depending on different criteria (R2, classification table, ROC curve) to compare between logit model and discriminant model, it has been revealed that logit model is better in explaining financial distress. Originality/ value: This article is one of the first to investigate whether board of directors' attributes contribute to explain of the occurrence of financial distress in the context of Egypt's economy.

DOI

10.21608/cfdj.2021.207373

Keywords

financial distress, Board of Directors, Corporate Governance, logit model, discriminant analysis model

Authors

First Name

سارة

Last Name

صبحي محمد

MiddleName

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Affiliation

قسم ادارة الاعمال -کليه التجارة - جامعة القاهرة

Email

sarah_sobhy@foc.cu.edu.eg

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Orcid

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Volume

3

Article Issue

1

Related Issue

29193

Issue Date

2022-01-01

Receive Date

2021-02-07

Publish Date

2022-01-01

Page Start

205

Page End

234

Print ISSN

2682-3403

Online ISSN

2682-4531

Link

https://cfdj.journals.ekb.eg/article_207373.html

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https://cfdj.journals.ekb.eg/service?article_code=207373

Order

7

Type

المقالة الأصلية

Type Code

1,242

Publication Type

Journal

Publication Title

المجلة العلمية للدراسات والبحوث المالية والتجارية

Publication Link

https://cfdj.journals.ekb.eg/

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Article

Created At

22 Jan 2023