Corporate Governance Structures and Firm Value: The Mediating Role of Financial Distress in ASEAN Construction Companies

This study tests the connectionbetween corporate governance structures and firm value, incorporating financial distress as a mediating mechanism among construction companies listed in ASEAN markets. Utilizing a sample of 58 firms drawn from an initial population of 169 companies over the 2018–2021 period, this study measures governance mechanisms through managerial ownership, institutional ownership, independent commissioners, audit committees, and litigation risk. Firm value is proxied by Tobin’s Q, while financial distress is assessed utilizing the Altman Z-Score. Panel data regression is employed to test the direct connections, and the Sobel test is used to evaluate the mediating role of financial distress. The outcome describes that managerial ownership and audit committees have a favorable effect on firm value, whereas independent commissioners and litigation risk exert a negative influence. Institutional ownership shows no significant association with firm value. Moreover, institutional ownership significantly affects financial distress, whereas the other governance mechanisms show no significant association with financial distress, although financial distress itself has a detrimental impact on firm value. The mediation analysis describes that financial distress mediates only the connection between institutional ownership and firm value. These outcomes help clarify prior inconsistencies in the literature and underscore the importance of strengthening managerial ownership and audit committees, optimizing the role of independent commissioners, and mitigating litigation risk to sustain firm value.