Ownership and state-based underpinnings of financial distress among successful entrepreneurial firms

Purpose We investigate the influence of promoters’ ownership and state-based underpinnings (proxied as national governance) on the financial distress of successful entrepreneurial firms. In this study, we consider listed small and medium-sized enterprises (SMEs) to be successful entrepreneurial firms because some level of success is required before the firms, which once started as entrepreneurial ventures, qualify for market listing. Design/methodology/approach The research uses unbalanced panel data regression analysis to examine a sample of 80 Indian-listed SMEs over seven years (2017–2023). The SMEs are sampled from the Bombay Stock Exchange’s SME listing platform in India. Findings The main findings signify that both promoters’ ownership and national governance have linear and significant effects on financial distress. Further, national governance does not significantly moderate the linkage between promoters’ ownership and financial distress. Our findings provide a comprehensive understanding of how internal and external governance mechanisms should interact to mitigate financial distress. Originality/value The study highlights the inadequacy of interaction as well as the significance of the coexistence of internal and external governance mechanisms for better financial stability in successful entrepreneurial firms.