A Moderating Role of Market Competitiveness Between the Compliance Context of Board Attributes and Financial Distress:

Abstract

This paper aims to highlight the significance of various characteristics of the board with respect to the financial distress level of the firm, augmented with the interaction of market competition in the compliance context. To achieve the objective, data for non-financial listed firms from Pakistan Stock Market for the period of 2010-2020 was collected on which stepwise panel regression analysis was applied. The findings of the study reveal mixed and partially consistent results with past outcomes and code compliance: board independence and board diligence mostly favor the firms and decrease the financial distress but females on board decrease the financial distress only if the firm has token participation of females on board. Market competition encourages the stability of the firm but its interaction with the board's gender, independence and diligence do not support the financial distress. This work is limited to board characteristics, moderating effect of market competition, and non-financial firms. However, it can be further expanded by incorporating other segments of governance to measure the role of competition. This study encourages the firms to follow the guidelines provided by the regulator in its code of corporate governance because compliance with the law brings the chance of distress down and away. Board members and policymakers of firms can expand their control on this mechanism to control the shuts coming of market competitiveness.