Corporate governance and financial distress: Moderating role of firm complexity in an emerging economy

Corporate governance has been widely applied in developed countries to promote accountability, transparency, and efficiency within corporations. In Vietnam, as the country transitions toward integrating international standards, corporate governance has become an emerging and critical area of focus. Therefore, this study aims to examine the relationship between corporate governance characteristics and corporate financial distress. The study utilizes the dataset of about 500 listed companies in the Vietnam stock exchange during 2014–2022. Feasible generalized least squares regression (FGLS) is employed to account for the heteroskedasticity and autocorrelation problems. Regression results show that frequent board meetings and more gender-diverse boards improve corporate financial health, while an increase in board members and duality roles have negative effects. Duality is often associated with increased agency problems, inefficient capital usage, and higher risk levels that reduce financial health. However, the impact is different in complex firms measured by book-to-market ratio and operating cycles. In complex firms, duality proves valuable by providing unified leadership and enabling active, clear management strategies. This can be explained by the fact that clear and flexible strategies outweigh the benefits of separation between the chairman and Chief Executive Officer. AcknowledgmentThe author gratefully acknowledges the financial support from the Banking Academy of Vietnam.