Corporate governance and financial distress: evidence from public-listed electronics companies in Taiwan

The purpose of this paper is to construct a financial distress pre-warning model by financial ratios and corporate governance variables for investors and risk supervisors. Through the Securities and Futures Institute network, we collect the financial and corporate governance data of the electronic companies listing on the Taiwan Security Exchange (TSE) from 1998 to 2005. By binary logistic regression test, we found that return on total assets (ROA) and cash flow ratio show significant difference in different financial stages. Besides, we find that if used financial ratios combined with corporate governance variables to construct a financial distress pre-warning model, it could get better prediction validity than only used financial ratios.