Corporate governance and financial distress: A review of the theoretical and empirical literature

This study comprehensively reviews the theoretical and empirical literature on the relationship between corporate governance and financial distress and provides future research directions. We follow several different approaches by identifying, reviewing, and classifying related articles during the period 1985 to 2021. We used a set of keywords that included a combination of different terms of corporate governance and financial distress. Our review indicates that the majority of the studies based their arguments considering a single theory. The generalizability of different results in less explored countries is a serious concern and the one-size-fits-all approach does not apply to the corporate governance-financial distress relationship. Several different theories and confounding factors need consideration when examining the relationship between corporate governance and financial distress. Our review highlights future avenues by suggesting that studies should consider different governance attributes and test those factors in different and diverse contexts. Our review of the literature provides implications for academics and practitioners.