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In this dissertation, I try to advance our understanding of how managerial discretion and corporate financial flexibility affect various corporate outcomes such as failure, excessive (sub-optimal) continuation, firm growth and investment, in three novel ways. First, I show that the empirical effect of finance is not merely a misspecified real influence but rather that the financial structure of firms matter for firm growth and investment where the real effects of finance arise out of the imperfect substitutability between internal funding and external private credit. Second, using managerial mergers and acquisitions (M&A) investment decisions as an identification mechanism, I find that managerial discretion combined with corporate financial flexibility may lead to distortions in corporate investment and financing policies, and those distortions cost the various stakeholders of the firm dearly. Furthermore, using another sample of distressed firms worth more dead than alive, I, along with a co-author, show that most of these firms continue operations long after the optimal exit time. The failure to liquidate costs the typical sample firm over three years 8.7% of its assets in lost earnings relative to the industry median. Finally, I find that capital market does not fully internalize the costs associated with managerial sub-optimal behaviors in the short run. Although the market disciplines managerial sub-optimal behaviors in the long run, the market disciplinary mechanisms may not be swift enough to forestall falling values for the various stakeholders of the firm. Succinctly, the findings in this dissertation suggest that managerial discretion and corporate financial flexibility entail real consequences for various firm dynamics. The traditional line of argument, ``Blame It on the Market," may not be well grounded, and firms need to carefully examine their investments and financing policies in good times to cushion against systematic shocks in bad times.

In this dissertation, I try to advance our understanding of how managerial discretion and corporate financial flexibility affect various corporate outcomes such as failure, excessive (sub-optimal) continuation, firm growth and investment, in three novel ways. First, I show that the empirical effect of finance is not merely a misspecified real influence but rather that the financial structure of firms matter for firm growth and investment where the real effects of finance arise out of the imperfect substitutability between internal funding and external private credit. Second, using managerial mergers and acquisitions (M&A) investment decisions as an identification mechanism, I find that managerial discretion combined with corporate financial flexibility may lead to distortions in corporate investment and financing policies, and those distortions cost the various stakeholders of the firm dearly. Furthermore, using another sample of distressed firms worth more dead than alive, I, along with a co-author, show that most of these firms continue operations long after the optimal exit time. The failure to liquidate costs the typical sample firm over three years 8.7% of its assets in lost earnings relative to the industry median. Finally, I find that capital market does not fully internalize the costs associated with managerial sub-optimal behaviors in the short run. Although the market disciplines managerial sub-optimal behaviors in the long run, the market disciplinary mechanisms may not be swift enough to forestall falling values for the various stakeholders of the firm. Succinctly, the findings in this dissertation suggest that managerial discretion and corporate financial flexibility entail real consequences for various firm dynamics. The traditional line of argument, ``Blame It on the Market," may not be well grounded, and firms need to carefully examine their investments and financing policies in good times to cushion against systematic shocks in bad times.

This study aims to add a new dimension to research in Australia on the use of accounting ratios to predict corporate failure. Previous studies have used the statistical technique of discriminant analysis to derive models for predicting whether a firm will or will not fail. This study will use the same statistical technique but with three differences: / (a) The ratios to be used in the discriminant analysis are selected by a method which ensured that no arbitrary limit is placed on their number. / (b) Because the significance of accounting ratios can vary from industry to industry, four industries are separately analysed: manufacturing, retail, property, and finance. / (c) The statistical probabilities yielded by the analysis are used to measure a firm’s current level of insolvency risk. / The extra dimension is added by interpreting the characteristic patterns of insolvency risk which emerge: an analysis of the factors causing the differences in these patterns throws new light on the causes, symptoms, and remedies of financial distress.

This thesis examines behavioural risks in corporate governance, and seeks to ascertain what constitutes behaviour. It finds upon an examination and analysis of literature that “personality” and “situations” are elements which contribute to behaviour. Consideration of risk management mechanisms in corporate governance indicates that the personality aspect of behavioural risks has remained largely unidentified. The thesis then focuses on the personality of company directors as a significant contributory factor to their behaviour, and therefore also constituting potential behavioural risks in relation to corporate governance. A question then arises as to how behavioural risks and personality risks in particular have been managed in corporate governance. Taking cognisance of the processes involved in risk management, it is found that personality risks have not been identified by any corporate governance mechanisms, and which means, therefore, that these risks have not been managed effectively under any of the existing corporate governance mechanisms, such as the Turnbull Guidance, UK Corporate Governance Code, UK Companies Act, and EU Company Law Directives.Considering the negative economic and social impact of corporate failures in relation to public listed companies, and the justification for the State to intervene in order to safeguard society from the occurrence and consequences of these failures, this thesis suggests a hybrid regulatory model as an approach to managing personality risks in corporate governance. Building upon relevant corporate and regulatory theories; and incorporating current realities as they relate to the regulation of companies, the thesis proposes a model with suggested provisions which are aimed at contributing to an effective outcome as regards personality risk management. The fundamental requirements of an effective risk management process are discussed and engaged with in the process of developing a conceptual framework for personality risk management from which the approach and provisions in the suggested model are drawn.

Rough set prediction capability was compared with actual auditor signaling rates for a large sample of United States companies from 1991 to 1997 time period. Prior bankruptcy prediction research was carefully reviewed to identify 11 possible predictive factors which had both significant theoretical support and were present in multiple studies. Rough sets theory was used to develop two different bankruptcy prediction models, each containing four variables from the 11 possible predictive variables. In contrast with prior rough sets theory research which suggested that rough sets theory offered significant bankruptcy predictive improvements for auditors, the rough sets models did not provide any significant comparative advantage with regard to prediction accuracy over the actual auditors' methodologies.

Yes / This study investigates the associations between audit committee characteristics and the likelihood of auditors' going-concern decisions among UK failed firms. Specifically, we examine whether the threat posed by auditor-provided non-audit services (NAS) to auditors' reporting decisions is mediated by audit committee characteristics. We find that failed firms with higher proportions of independent non-executive directors (NEDs) and financial experts on the audit committee are more likely to receive auditor going-concern modifications prior to failure, but that there is no significant relationship between NAS fees and the likelihood of receiving a going-concern modification. The evidence further suggests that the association between NAS and auditors' reporting decisions is subject to audit committee characteristics. Where the audit committee is more independent and includes a greater proportion of financial experts, auditors providing the client with NAS are less likely to issue a standard unmodified going-concern report prior to failure. Overall, the findings provide support for corporate governance regulators' concerns about the monitoring benefits of audit committee independence and the presence of financial expertise on the audit committee for auditors' reporting decisions.

Prior research on the ability of financial ratios to predict bankruptcies has shown a significant difference between the companies that went into bankruptcy and those that survived. This paper investigates whether there is a difference in the prediction ability of financial ratios during the last financial crisis compared to relatively normal macroeconomic environments in which most previous studies have been conducted. We use univariate analysis to compare companies that went into bankruptcy during 2010 and 2011 with companies that remained active. Our dataset consists of 51 failed companies that are matched with 102 companies that remained active. All companies were Swedish limited companies with more than 50 employees and the comparison is made with 26 financial ratios. Our result indicates that financial ratios were better tools to predict bankruptcy during the crisis than during more stable macroeconomic conditions. In total 24 of the analyzed financial ratios differed significantly between the two populations and many of them showed significance earlier prior to the bankruptcy than in comparable studies.

Cette thèse porte sur le processus de défaillance des entreprises en Tunisie. L’objectif est d’étudier le sujet d’un point de vue, à la fois, macroéconomique, microéconomique et juridique. Le travail est précédé d’une revue de la littérature axée sur les principaux intervenants dans le processus de faillite : les débiteurs, les créanciers et la législation en matière de faillite.La première partie propose une synthèse des résultats de nombreux travaux de recherche se rapportant, d’une part, aux différentes stratégies fixées par les débiteurs et les créanciers en vue de protéger leurs propres intérêts et d’autre part, à l’efficacité des procédures collectives dans la prévention des éventuelles utilisations opportunistes de la loi. Dans un second temps, la thèse traite le sujet d’un point de vue macroéconomique en cherchant à déterminer l’effet des fluctuations macroéconomiques sur le taux de défaillance en Tunisie sur la période allant de 1997 à 2010. Des variables spécifiques au cas tunisien et exprimant au mieux l’importance des secteurs de l’industrie et du tourisme dans l’économie tunisienne ont été considérées dans le modèle en plus des variables communément utilisées dans la littérature et qui ont prouvé leur rôle relativement significatif dans l’explication des taux de défaillance.La troisième partie de la thèse se concentre sur le niveau d’efficacité des procédures collectives tunisiennes dans la résolution du problème de défaut de paiement. Son efficacité est étudiée de point de vue : i) création de valeur et ce en termes de recouvrement total des créanciers à travers la maximisation de la valeur de l’entreprise défaillante, et ii) recouvrement des créanciers sécurisés. L’intérêt particulier porté sur la classe des créanciers sécurisés (notamment les banques) est justifié par l’importance du secteur bancaire dans le financement des entreprises en Tunisie et par conséquent dans le développement de l’économie tunisienne.La dernière partie de la thèse propose une analyse approfondie de la loi de faillite tunisienne dans le cadre d’une étude comparative avec 18 autres pays européens et non européens.A travers une approche « Law and Finance », dix indices juridiques ont été construits pour « mesurer » dix fonctions de Droit de faillite. Ensuite, des analyses univariée et multivariée ont été menées pour dégager les points de similarité ou de disparité entre les différentes lois de faillite. / This thesis focuses on the Tunisian bankruptcy process. The objective is to treat the subject from a macroeconomic, microeconomic and legal point of view. The work is preceded by a literature review focused on the main actors in the bankruptcy process: debtors, creditors and bankruptcy law. The first part provides a summary of many research results relating on the one hand, to the different strategies set by debtors and creditors to protect their own interests and on the other hand to the effectiveness of the procedures in preventing any opportunistic uses of the law. In the second part, we seek to determine the effect of macroeconomic fluctuations on the failure rate of businesses in Tunisia over the period 1997-2010. The selected variables are those that have been frequently used in the literature and that showed their significant impact onto the rate of corporate failure. Other original variables, more specific to the Tunisian case were considered to account for the importance of industry and tourism sectors in the Tunisian economy. The third part of this thesis focuses on the efficiency of bankruptcy procedures in Tunisia, a country characterized by the importance of its banking sector. We gathered original and unique information on Tunisian firms that went bankrupt between 1995-2009. We find that the Tunisian reorganization procedures are able to generate substantial recoveries, but those are mainly captured by the preferential claims (employees and public claims). This is coherent with the authorities’ willingness to improve social protection, but this raises concerns as the Tunisian firms are mainly financed by bankers. Our analysis shows that the secured creditors are poorly protected under bankruptcy: they rank almost last in the priority order of repayment, and their recovery rate is similar to one of the unsecured creditors. We also find that the rather high level of recovery rate is mainly attributable to the reorganization procedures. We finally find that the court’s choice between reorganization and liquidation is not influenced by the structure of claims. Thus, in Tunisia, the creditors are losing hand once bankruptcy is triggered.To better understand the characteristics of Tunisian bankruptcy procedures, the last part of the thesis offers a comparative study of Tunisian bankruptcy law with 18 other European and non-European countries. Ten legal indexes were constructed through "Law and Finance" approach to "measure" ten functions of bankruptcy law.Univariate and multivariate analyzes were conducted to identify the similarity or disparity points between the various bankruptcy laws.