Shield or Sink? Examining How Corporate Governance Influences Bankruptcy in India

Abstract

Economies have been witnessing escalating cases of corporate bankruptcies, and these are rampant in emerging economies owing to weaker internal control mechanisms, as well as laxity in the implementation of corporate governance norms and regulations. This study aims to explore the impact of various corporate governance variables on the risk of corporate bankruptcy in the context of India. Data of 1,980 non-financial firms listed on the National Stock Exchange, from 2010 to 2023, were analysed using static and dynamic panel data techniques. The findings indicate that board size, proportion of independent directors and percentage of women directors reduce the chances of corporate bankruptcy, while CEO age enhances the possibility of bankruptcy. The study holds practical relevance for managers and corporates, helping in the identification of corporate governance attributes that can facilitate reduced distress for firms. It also contributes to policymaking by advising on further advancement of regulatory aspects to make stringent laws and policies.