Board composition, ownership structure and financial distress: insights from UK FTSE 350

Ali Meftah Gerged, Shaojie Yao, Khaldoon Albitar

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Purpose – This study investigates the possible implications of compliance with corporate governance (CG) provisions, including board composition and ownership structures, on the firm's likelihood of falling into financial distress.

Design/methodology/approach – Our study applies a random-effects logistic regression model as a baseline analysis using a sample of 110 FTSE350 manufacturing companies from 2014 to 2019. This technique is supported by conducting a two-stage Heckman regression model to overcome the potential existence of endogeneity problems.

Findings – Our empirical evidence suggests that board composition and ownership structure are heterogeneously associated with financial distress probabilities in that they might have either reduced or increased the financial distress of the sampled firms. Specifically, board independence, board gender diversity, audit committee independence, and institutional ownership negatively influence the likelihood of financial distress. In contrast, and consistent with our expectations, ownership concentration is positively attributed to financial distress, while the board size, audit committee size, and managerial ownership have insignificant impacts on financial distress.

Originality/value – Our study extends the existing body of knowledge by examining the collective effect of board characteristics and ownership structures on firms’ financial distress likelihood among a sample of manufacturing firms within the FTSE350 index post the 2008 global financial crisis and following the recent CG reforms in the UK during the study period from 2014 to 2019.
Original languageEnglish
Number of pages22
JournalCorporate Governance: The International Journal of Business in Society
Early online date22 Oct 2022
Publication statusEarly online - 22 Oct 2022


  • board composition
  • corporate governance
  • financial distress likelihood
  • FTSE 350
  • ownership structure


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