Board Composition, Ownership Structure and Financial Distress - Insights from UK FTSE 350

Aug 25, 2026

Uploaded by Jiven

This study examines how compliance with corporate governance provisions—specifically board composition and ownership structure—affects firms’ probability of financial distress. Using a random-effects logistic regression baseline on 110 UK FTSE 350 manufacturing companies from 2014–2019, the analysis is supported by a two-stage Heckman regression to address potential endogeneity. Results show heterogenous relationships: board independence, board gender diversity, audit committee independence, and institutional ownership reduce distress likelihood, while ownership concentration increases it. Board and audit committee size and managerial ownership are found insignificant.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages43

Reading Time1 h 48 min

AccessFree to download

Abstract

Purpose

Design/methodology/approach

Findings

Originality/value

1. Introduction

Background: 2007–2008 financial crash and agency issues

Corporate governance as a control mechanism

Board characteristics and ownership structure definitions

Prior literature on financial distress

Board Composition, Ownership Structure and Financial Distress: Insights from UK FTSE 350 (Short title: Corporate governance and financial distress) Ali Meftah Gerged Corresponding author Leicester Castle Business School, De Montfort University, The Gateway, Leicester, LE 9BH, UK, and Faculty of Economics, Misurata University, Misurata City, PO Box 2478 [ali.gerged@dmu.ac.uk](ali.gerged@dmu.ac.uk) Shaojie Yao Leicester Castle Business School, De Montfort University The Gateway, Leicester, LE1 9BH, UK [Shaojie.yao@dmu.ac.uk](Shaojie.yao@dmu.ac.uk) Khaldoon Albitar Portsmouth Business School, University of Portsmouth Winston Churchill Avenue, Portsmouth, Hampshire, PO1 2UP, UK [khaldoon.albitar@port.ac.uk](khaldoon.albitar@port.ac.uk) - The study was NOT supported by a research grant from any academic and/or non-academic institutions. Funding information does not apply to this study. - The authors declare that they have no conflicts of interest. - This article does not contain any studies involving human participants performed by any of the authors. This paper can be cited as follows: Gerged, A. M. , Yao, S. , Albitar, K. (2022) . Board Composition, Ownership Structure and Financial Distress: Insights from UK FTSE 350. Corporate Governance. In Press: DOI – 10.1108/CG-02-2022-0069 Board Composition, Ownership Structure and Financial Distress: Insights from UK FTSE 350 Abstract 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. Keywords: Board Composition, Corporate Governance, Financial Distress Likelihood, FTSE 350, Ownership Structure. Paper type: Research paper 1. Introduction: The consequences of the 2007–2008 financial crash experienced widespread financial distress probabilities for corporations worldwide, with enormous exceptional influences on entire economies (International Monetary Fund, 2012) . One of the most prominent reasons for this financial crisis was primarily related to micro-foundations (Erkens et al. , 2012) . The inspecting roles of corporate boards and ownership structures were ruthlessly interrogated (Aebi et al. , 2012) . These critiques suggest that adequate compliance with good corporate governance (CG) practices are essential for businesses’ financial performance, including decreasing the likelihood of financial distress (Dowell et al. , 2011; Mangena et al. , 2020) . Thus, we have been motivated in this study t

FAQs

What is the purpose of the study on corporate governance and financial distress?

The study investigates how compliance with corporate governance provisions, particularly board composition and ownership structures, influences a firm’s likelihood of falling into financial distress.

How is the empirical analysis conducted?

The authors use a random-effects logistic regression model as a baseline on 110 FTSE 350 manufacturing companies (2014–2019) and apply a two-stage Heckman regression to mitigate potential endogeneity.

Which governance and ownership factors are associated with a lower or higher likelihood of financial distress?

Board independence, board gender diversity, audit committee independence, and institutional ownership are negatively associated with financial distress likelihood, while ownership concentration is positively associated.

Aug 25, 2026

Uploaded by Jiven