Board Characteristics and the Insolvency Risk of Non-Financial Firms

How do board characteristics influence the risk of bankruptcy? We study this question by estimating classic Z-Score models using panel data comprising 2519 listed non-financial firms from 29 European countries over 2012–2020 period. found that independence is associated with lower bankruptcy. In contrast, employee representatives have an adverse effect on monitoring capacity and are predicted to increase bankruptcy risk. The presence female directors foreign board—two indicators diversity—reduce While diversity decrease in financially non-distressed firms, they opposite distressed firms. These findings statistically economically significant hold, at least part, under alternative specifications. Our demonstrate need for governance regulators, credit rating agencies, financial institutions, investors lend more weight composition, especially conditions impending distress.