Corporate Governance and Firm Survival

Abstract

We explore how various aspects of corporate governance influence the likelihood of a public corporation surviving as a separate public entity, after addressing potential endogeneity that arises from competing corporate exit outcomes: acquisitions, going†private transactions, and bankruptcies. We find that some corporate governance features are more important determinants of the form of a firm's exit than many economic factors that have figured prominently in prior research. We also find evidence that outsider†dominated boards and lower restrictions on internal governance play major roles in the way firms exit public markets, particularly when a firm's industry suffers a negative shock. Overall, our results suggest that failure to recognize competing risks produces biased estimates, resulting in faulty inferences.