What does this research mean for the field?

Firm size significantly increases financial distress risk, but this risk is mitigated more effectively by ownership-based governance mechanisms (managerial and institutional ownership) than by board-based mechanisms. Novelty: ClaimNovelty.CONTRADICTORY. Consensus alignment: ConsensusAlignment.CHALLENGES_CONSENSUS.

What question did this study set out to answer?

To examine how corporate governance mechanisms moderate the relationship between firm size and financial distress risk across manufacturing companies.

September 8, 2026Cogent Business & ManagementOpen Access

The moderating role of corporate governance on the relationship between firm size and financial distress in Indonesian manufacturing firms

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Authors

ZNZahroh NaimahAirlangga University SISri IswatiUnited States Department of Defense MHMuhamad Afrizal Hanafi

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Implication

Panel data analysis reveals that ownership-based governance mitigates size-related financial distress in manufacturing firms, indicating that governance quality outweighs committee size.

Key Points

To examine how corporate governance mechanisms moderate the relationship between firm size and financial distress risk across manufacturing companies.
Analyzed 480 firm-year observations from Indonesian manufacturing firms between 2019 and 2023.
Employed panel data regression with a continuous moderation framework evaluating managerial ownership, institutional ownership, audit committee size, and independent commissioner proportion.
Firm size significantly increased financial distress risk, refuting the conventional 'too-big-to-fail' hypothesis.
Managerial ownership (β = 0.300, p < 0.01) and institutional ownership (β = 0.229, p < 0.01) significantly weakened the positive relationship between firm size and financial distress.
Audit committee size strengthened distress risk (β = -0.088, p < 0.05), while the proportion of independent commissioners showed no significant moderating effect (β = -0.105, p > 0.10).

Cite This Study

Naimah et al. (2026) studied this question.

synapsesocial.com/papers/6aa0091858e84d0ff5b47bdf https://doi.org/10.1080/23311975.2026.2725979

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Implication

Panel data analysis reveals that ownership-based governance mitigates size-related financial distress in manufacturing firms, indicating that governance quality outweighs committee size.

The moderating role of corporate governance on the relationship between firm size and financial distress in Indonesian manufacturing firms

Discussion

Member takes

Implication

Key Points

Cite This Study

The moderating role of corporate governance on the relationship between firm size and financial distress in Indonesian manufacturing firms

Discussion

Member takes

Implication

Key Points

Cite This Study

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