Abstract:
Default prediction has commanded the attention of researchers for at least 50 years. This paper
addresses several testable hypotheses regarding the relations between corporate governance
and default prediction. We employ the conventional logistic regression to provide empirical
evidence from U.S. default data over the period of 2000 to 2015. Empirical results are consistent
with the following notions: First, default firms are associated with high ownership concentration,
low shareholder rights, low financial transparency and disclosures, and less board effectiveness.
Second, in-sample and out-of-sample tests support the incremental contribution of corporate
governance information on default prediction, when compared with the models involving just
financial information.
