Corporate Governance: The Application Tool to Predict the Business Failures

Abstract

Corporate governance principle has played an important role in predicting the business failure, because the concept of good corporate governance will result in value and value added to the business and shareholders. Several previous studies attempt to find the relationship between corporate governance mechanisms and firm’s performance. It was expected that company with good performance will not be likely to go bankrupt. However, this article reviews the compiled documents and studies in the past concerning corporate governance mechanisms (board structure, board committees, and ownership) as application tool to predict business failures.