کیفیت حاکمیت شرکت: نقش فرصت های رشد و نقدینگی سهام Does corporate governance quality affect default risk? The role of growth opportunities and stock liquidity

1. Introduction Default is among the most disruptive events in the life of a corporation. It is imperative for a firm to avoid default because it brings bankruptcy-filing, legal, and professional costs. It interrupts the supply chain and causes disruptions in productivity (Brogaard et al., 2015). In a case of default, customers may become reluctant to buy products from the defaulted firm; suppliers may tighten credit terms; some current employees may become demotivated due to fear of job insecurity; others may seek employment elsewhere. In addition, default brings mental stress to the proprietor, the entrepreneur, the managers, and their families; it may even destroy lives, ruin the health of its victims and, in a worst-case scenario, push victims to commit suicide (Argenti, 1976). Given these severe consequences of default, it is imperative to explore what determines default risk. In particular, we aim to answer: Does corporate governance affect default risk? Corporate governance has attracted considerable public attention in recent years around the globe. It has emerged as a hot topic of discussion among researchers and regulators as a result of a number of high profile corporate scandals. For instance, in 2001 the bankruptcy of HIH Insurance—a major provider of all types of insurance in Australia—was attributed to problematic internal governance such as the improper functioning of the board and the lack of independence of the internal audit committee and the external auditors (Owen, 2003). Similarly, media reports, as well as Australian Government ministers, blamed inefficient management for being the prime reason for the failure of Ansett Australia—Australia’s second-largest airline carrier—in 2002 (see Leiper, 2002). Furthermore, in 2001 the bankruptcy of OneTel—once Australia’s fourth-largest telecommunication firm, with over 2 million customers and operations in eight countries—is associated with deficiencies in its internal governance, including weaknesses in internal structures and processes, audit quality, and the board’s scrutiny of management (see Monem, 2011). These corporate collapses have resulted in the loss of thousands of jobs and have shattered multi billions of dollars in shareholder wealth.1 Since these corporate scandals were attributed to problematic internal governance mechanisms, considerable debate initiated to overcome weak corporate governance practices (Kang et al., 2007) resulted in various legislative reforms. In particular, ASX CG Council and related bodies became more vigilant about the risk prevailing in a firm’s balance sheet and developed the new governance framework “Principles of Good Corporate Governance and Best Practice Recommendations” in 2003 to deter managers from wealth expropriation and thus restore the confidence of investors (Clarke and Dean, 2007).