أثر العلاقة بين خصائص مجلس الإدارة وجودة الأرباح على خطر التعثر المالي للشركات : أدلة عملية من بيئة الأعمال المصرية

Abstract EN

Measuring the Impact of the Relationship between Characteristics of the Board of Directors and Earnings Quality on Financial Distress Risk for companies listed in the Egyptian Stock Exchange.

Design and Methodology: The study adopted the content analysis approach to analyze the content of the financial statements for a sample of 129 non-financial joint stock companies listed in the Egyptian Stock Exchange during the period from (2016) to (2018), with a total of (387) observations in order to test the study's hypotheses that reflect the impact of the relationship between the characteristics of the board of directors represented in (Board independence, CEO duality, Diversity of the board, Board size) and earnings quality indicators (Earnings Persistence) and (Earning Predictability ) in order to predict the financial distress risk of companies listed in the Egyptian Stock Exchange using (Emerging Markets Score (EMS)) model.

Altman & Hotchkiss developed the (Altman Z-Score) model to be suitable for emerging markets and have fairly accurate indicators in predicting the financial distress risk of companies in developing countries, including the Egyptian business environment.

The current study developed 4 models to achieve the purpose of the study: The first one measures the impact of the characteristics of the board of directors on earnings quality, while The second model measures the impact of the characteristics of the board of directors on financial distress risk, The third one measures the impact of earnings quality on the financial distress risk.

Finally, the fourth model measures the interactive impact of the relationship Between the characteristics of the board of directors and the earnings quality on the of financial distress risk.

Conclusions and RecommendationsThe results of the current study indicated that the characteristics of the board of directors have a significant positive effect on earnings quality of the study sample, Moreover, (The independence of the board of directors, the size of the board of directors, and the diversity of the board of directors) have a positive significant relation with both the predictability and persistence of earnings, while, the duality of the CEO has a negative significant relation with both predictability and persistence of earnings.

Also, the characteristics of the board of directors (the independence of the board of directors, the size of the board of directors, and the diversity of the board of directors) have a negative significant effect on financial distress risk, While the duality of the CEO has a positive significant relation with financial distress risk, also, the study presented a negative significant effect of earnings quality through earnings persistence and earnings predictability on financial distress risk.

Finally, the study found a negative and significant effect of the relationship between the characteristics of the board of directors and earnings quality on financial distress riskStudy limitations: The study is limited by an objective constraint represented in measuring the effect of the relationship between the characteristics of the board of directors and earnings quality on financial distress risk, a spatial constrain represented in conducting the applied study on a sample of non-financial companies listed in the Egyptian Stock Exchange, and a time constrain represented in the scope of the study period from the year (2016) to (2018).

Moreover, it should be known that the results may vary relatively if the sample, the period or the measuring methods used differ.

Practical Implications: The theoretical framework has been applied to a sample of companies listed in the Egyptian Stock Exchange to show the interactive effect of the relationship between the characteristics of the board of directors and earnings quality on the risk of financial distress Originality and value: This study contributes to the accounting literature by completing the efforts of researchers in the field of predicting financial distress risk, The study analyzed the relationship between the characteristics of the board of directors and the earnings quality and their impact on financial distress risk and providing empirical evidence from the Egyptian business environment, which would help companies in discovering financial difficulties before entering the distress phase and giving warning signals to the management and stakeholders to take the necessary procedures to avoid financial failure which lead to liquidation and bankruptcy