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We empirically test whether various characteristics of the CEO have an impact on the
corporate survival of firms in Pakistan. The corporate governance literature suggests
that various characteristics of the CEO have an impact on various aspects of firm
performance as a whole. Ultimately these characteristics of the CEO must also have
implications for the firm’s overall survival. Moreover, Pakistan, being a developing
country with a corporate governance landscape that is in its infancy, provides a natural
setup to see how CEO characteristics link with firm survival in developing countries.
Using Panel FGLS Regression and Panel Logistic Regression Analysis over a sample of
42 non-financial firms from the KSE-100 index for the period 2009-2013, it is the finding
that CEO Ownership and Tenure are significant determinants of a firm’s survival
probability. The results suggest that a one year rise in CEO tenure and a 1% rise in CEO
Ownership may reduce the distress probability by 2% and 17%, respectively. The study
also finds that trade debt and interest coverage ability are also related to a firm’s
distress risk. These findings suggest that the CEOs should be given more ownership such
as share-based compensation in the firm which does not only help reducing agency
conflicts but also improves the firm’s financial health.
Kalsoom Zahra , Majid Jamal Khan, Muhammad Akib Warraich. (2018) CEO Characteristics and the Probability of Financial Distress: Evidence from, NUML International Journal of Business & Management, Volume 13, Issue 2.
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