Board Structures and Managerial Ownership in Identifying the Financial Distress Likelihood

Abstract: This study investigates the impact of board structures and managerial ownership on the ability in preventing financial distress in the context of Indonesia and Malaysia consumer goods companies. Board structure consists of board size, composition and gender diversity. Ability in preventing in financial distress is measured by profitability (EBIT), financial expense (FE) and retained earnings (RE). This research study examines the consumer goods companies in Indonesia and Malaysia for the period of 2011 to 2015 with the total sample of 24 Indonesia companies or 120 firm-years observations and 98 Malaysia companies or 490 firm-years observations. The data examined by Partial Least Square (PLS) under the Structural Equation Model concept. The findings of this study present mixed results. Board size and board composition have significant impact on the ability in preventing financial distress in Indonesia whereas it is found insignificant in the case of Malaysia companies. On the contrary, in Indonesia, the managerial ownership has impact on the financial distress prevention, while Malaysia�s result shows there is a significant impact. Additionally, this study has found that gender diversity has a significant impact on the ability in preventing financial distress in both Indonesia and Malaysia. Gender diversity also serves as moderating variable in both countries regardless of the type of moderation between both countries.
Keywords: Board structure, Financial Distress, Consumer Goods Sector, Indonesia, Malaysia