Negative Net Worth of Manufacturing Companies: Corporate Governance and Industry Expectations

Transparent and effective corporate governance positively influences the financial stability of the company: it increases the investment attractiveness and reduces the cost of lending. For Russia, this problem is relatively new. And at the moment, corporate management in the manufacturing industry continues to be characterized by a high concentration of ownership and a combination of ownership and management functions. In this paper, using logistic regression we investigate the impact of corporate governance factors and sector expectations on a negative net worth of the companies in the period 2011-2015. The results showed, in particular, the probability of a negative company's net worth is higher, the lower the index of business confidence in the industry; the presence of agency problem; the smaller the number of member in the board of directors; the higher concentration of ownership; and, if company is not privately owned or joint stock company. Robustness of the coefficients of the final specification was confirmed.