The Name of Corporate Governance and the Possibility of Financial Stress of Companies Listed On the Tehran Stock Exchange by Explaining the Moderating Role of Management Skills

The purpose of this study is to explain the relationship between the characteristics of corporate governance or leadership on the probability of financial stress of companies on the Tehran Stock Exchange and to explain the moderating role of management capabilities on this relationship.

107 companies from 6 industries were surveyed during the years 92 to 96. Independent variables related to measuring corporate governance characteristics were divided into two categories. First, the characteristics related to the board of directors of companies, which are measured by the two variables of board size and independence of the board of directors, and second, are the audit characteristics of companies that have been measured using the variables of auditor size and type of auditor report. Data with the structural equation modeling approach of least partial squares.

The findings indicate that the characteristics of the board of directors have a negative effect on the probability of financial stress at the level of 10% error and the audit characteristics at the level of 5% error have a positive effect on the probability of financial stress. But the moderating role of management abilities on these relationships was not confirmed.

The results of this study indicate that improving some corporate governance or governance characteristics such as corporate board characteristics can reduce the likelihood of corporate financial stress, while improving some of these characteristics, such as improving corporate auditing characteristics, despite initial expectations. Not only are they unable to reduce the likelihood of financial stress, but they also have a detrimental effect on the likelihood of stress.