Corporate board vigilance and insolvency risk: a mediated moderation model of debt maturity and fixed collaterals

Yassir Hussain, Rana; Xuezhou, Wen; Hussain, Haroon; Saad, Muhammad; Qalati, Sikander Ali

doi:10.2478/ijme-2020-0032

Figures & Tables

A conceptual model of the current study.

Results of hierarchical PCSE regression with non-duality as IV

	Debt Maturity		Insolvency Risk

	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6	Model 7	Model 8
Control Variables
Size (SIZE)	0.00160 (0.003)	0.00224 (0.003)	−0.93308^*** (0.321)	−1.02897^*** (0.340)	−1.09899^*** (0.343)	−0.96605^*** (0.332)	−0.97559^*** (0.325)	−1.10897^*** (0.303)
Taxes (TAX)	0.00772 (0.005)	0.00769 (0.005)	−0.16607 (0.193)	−0.16175 (0.182)	−0.40188 (0.367)	−0.18751 (0.185)	−0.54600 (0.421)	−0.53800 (0.434)
Growth (FG)	0.04132 (0.023)	0.04205^* (0.024)	−0.34973 (0.500)	−0.46025 (0.488)	−1.77269^* (0.999)	−0.16476 (0.576)	−1.53567^* (0.860)	−0.28125 (0.651)
Profitability (ROA)	−0.00013 (0.000)	−0.00011 (0.000)	0.36536^*** (0.097)	0.36229^*** (0.096)	0.36585^*** (0.098)	0.33794^*** (0.089)	0.30989^*** (0.079)	0.30508^*** (0.082)
Volatility of returns (σROA)	−0.00289^*** (0.000)	−0.00280^*** (0.000)	−0.53881^*** (0.342)	−0.55181^*** (0.096)	−0.46419^*** (0.093)	−0.55673^*** (0.087)	−0.44523^*** (0.072)	−0.43472^*** (0.0750
Liquidity (LIQ)	−0.00035 (0.001)	−0.00035 (0.001)	1.14943^*** (0.035)	1.14839^*** (0.034)	1.15940^*** (0.041)	1.10864^*** (0.034)	1.06987^*** (0.024)	1.13018^*** (0.041)

Independent Variable
Non–duality (NDU)		−0.02763^*** (0.006)		4.14921^*** (1.497)	5.01171^*** (1.747)	3.58257^** (1.508)	3.98121^*** (1.641)	3.77374^** (1.465)

Mediator
Debt Maturity (DMR)					31.20601^*** (6.960)		42.07174^*** (8.680)	134.6859^*** (21.667)
Fixed Collateral (FC)						−11.74894^*** (4.09)	−27.59376^*** (4.556)	0.16597 (2.589)

Moderator
DM^*FC								−140.6002^*** (21.716)
Year Effect	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Industry Effect	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
R²	0.24	0.24	0.06	0.06	0.06	0.06	0.07	0.08
Prob>chi²	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000

Results of hierarchical OLS regression with board independence as IV

	Debt Maturity		Insolvency Risk

	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6	Model 7	Model 8
Control Variables
Size (SIZE)	0.00160 (0.003)	−0.00022 (0.003)	−0.93308 (1.373)	−0.94319 (1.393)	−0.93628 (1.390)	−0.87341 (1.394)	−0.77118 (1.388)	−0.91159 (1.383)
Taxes (TAX)	0.00772 (0.011)	0.00958 (0.011)	−0.16607 (4.654)	−0.15579 (4.662)	−0.45210 (4.651)	−0.20001 (4.662)	−0.66659 (4.642)	−0.65639 (4.624)
Growth (FG)	0.04132^*** (0.010)	0.03958^*** (0.010)	−0.34973 (4.157)	−0.35935 4.164	−1.58314 (4.174)	−0.04862 (4.172)	−1.32004 (4.167)	−0.07162 (4.166)
Profitability (ROA)	−0.00013 (0.000)	−0.00013 (0.000)	0.36536^*** (0.131)	0.36533^*** (0.131)	0.36963^*** (0.131)	0.33940^** (0.133)	0.31087^** (0.132)	0.30597^** (0.132)
Volatility of returns (σROA)	−0.00289^*** (0.001)	−0.00302^*** (0.001)	−0.53881^*** (0.201)	−0.53956^*** (0.202)	−0.44588^** (0.204)	−0.54528^*** (0.202)	−0.42396^** (0.204)	−0.41421^** (0.203)
Liquidity (LIQ)	−0.00035 (0.001)	−0.00038 (0.001)	1.14943^*** (0.202)	1.14930^*** (0.202)	1.16113^*** (0.202)	1.10768^*** (0.205)	1.06866^*** (0.205)	1.12913^*** (0.205)

Independent Variable
Board Independence (BI)		0.07101^*** (0.022)		0.39269 (9.045)	−1.80295 (9.052)	−0.28789 (9.061)	−4.21389 (9.084)	−4.14236 (9.048)

Mediator
Debt Maturity (DMR)					30.91784^*** (10.630)		42.55229^*** (11.548)	135.3171^*** (29.115)
Fixed Collateral (FC)						−12.32151 (10.381)	−28.694^** (11.249)	−0.84991 (13.784)

Moderator
DM^*FC								−140.8334^*** (40.606)
Year Effect	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Industry Effect	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
R²	0.24	0.25	0.06	0.06	0.06	0.06	0.07	0.08
Adjusted R²	0.23	0.23	0.04	0.04	0.05	0.04	0.05	0.06
F stat	19.29^***	19.01^***	3.75^***	3.59^***	3.81^***	3.51^***	3.92^***	4.25^***

j_ijme-2020-0032_apptab_001

	Sector	Total Firms	Selected Firms	Percentage
1	Textile	136	101	74.26%
2	Sugar	30	23	76.67%
3	Food Sector	16	11	68.75%
4	Chemical & Pharmaceuticals	43	34	79.07%
5	Manufacturing	31	25	80.65%
6	Mineral Products	09	05	55.56%
7	Cement Sector	17	17	100%
8	Motor Vehicles, Trailers & Autoparts	18	18	100%
9	Fuel & Energy Sector	22	14	63.64%
10	Information & Communication	11	10	90.91%
11	Coke & Refined Petroleum Products	10	09	90%
12	Paper, Paperboard & Products	09	07	77.78%
13	Electrical machinery & Apparatus	07	05	71.43%
14	Other Services Activities	10	05	50%
	Total	369	284	76.96%

j_ijme-2020-0032_apptab_002

	Variable	Notation	Measurement	Unit
1	Insolvency risk	IR	Measured through emergent market Z-score proposed by Altman (2005).	Ratio
2	Non-duality	NDU	A binary variable that assumes value ‘0’ in case of CEO duality and ‘1’ otherwise.	Binary
3	Board Independence	BI	Ratio of independent & non-executive directors to total directors.	Ratio
4	Debt Maturity	DMR	Ratio of long term debt to total debt.	Ratio
5	Fixed Collaterals	FC	Ratio of fixed assets to total assets.	Ratio
6	Size	SIZE	Natural log of value of total assets in each financial year.	Number
7	Taxes	TAX	Natural log of value of total taxes in each financial year.	Number
8	Firm Growth	FG	Rate of growth in firm's total assets.	Ratio
9	Profitability	ROA	Net profit (loss) scaled by total assets.	Ratio
10	Volatility of returns	σROA	Standard deviation of return on assets for last five years.	Ratio
11	Liquidity	LIQ	Ratio of current assets to current liabilities.	Ratio

Summarized Results

	Paths	Indirect Path		Direct Path	Mediation	Moderation

		Path A	Path B	Path C
	OLS regression
1	NDU-DMR^*FC-IR	−0.02763^* (0.014)	134.6859^*** (29.084)	3.77374 (5.771)	Full Mediation	Negative Moderation
2	BI-DMR^*FC-IR	0.07101^*** (0.022)	135.3171^*** (29.115)	−4.14236 (9.048)	Full Mediation	Negative Moderation

	PCSE regression
3	NDU-DMR^*FC-IR	0.02763^*** (0.006)	134.6859^*** (21.667)	3.77374^** (1.465)	Partial Mediation	Negative Moderation
4	BI-DMR^*FC-IR	0.07101^*** (0.021)	135.3171^*** (21.898)	−4.14236 (4.648)	Full Mediation	Negative Moderation

Results of hierarchical PCSE regression with board independence as IV

	Debt Maturity		Insolvency Risk

	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6	Model 7	Model 8
Control Variables
Size (SIZE)	0.00160 (0.003)	−0.00022 (0.003)	−0.93308^*** (0.321)	−0.94319^** (0.391)	−0.93628^** (0.374)	−0.87341^** (0.384)	−0.77118^** (0.340)	−0.91159^*** (0.321)
Taxes (TAX)	0.00772 (0.005)	0.00958 (0.006)	−0.16607 (0.193)	−0.15579 (0.204)	−0.45210 (0.370)	−0.20001 (0.225)	−0.66659 (0.463)	−0.65639 (0.451)
Growth (FG)	0.04132^* (0.023)	0.03958^* (0.022)	−0.34973 (0.500)	−0.35935 (0.502)	−1.58314^* (0.922)	−0.04862 (0.600)	−1.32004^* (0.767)	−0.07162 (0.663)
Profitability (ROA)	−0.00013 (0.000)	−0.00013 (0.000)	0.36536^*** (0.097)	0.36533^*** (0.097)	0.36963^*** (0.099)	0.33940^*** (0.089)	0.31087^*** (0.079)	0.30597^*** (0.082)
Volatility of returns (σROA)	−0.00289^*** (0.000)	−0.00302^*** (0.000)	−0.53881^*** (0.096)	−0.53956^*** (0.099)	−0.44588^*** (0.097)	−0.54528^*** (0.089)	−0.42396^*** (0.075)	−0.41421^*** (0.079)
Liquidity (LIQ)	−0.00035 (0.001)	−0.00038 (0.001)	1.14943^*** (0.035)	1.14930^*** (0.035)	1.16113^*** (0.043)	1.10768^*** (0.033)	1.06866^*** (0.022)	1.12913^*** (0.041)

Independent Variable
Board Independence (BI)		0.07101^*** (0.021)		0.39269 (4.675)	−1.80295 (4.723)	−0.28779 (4.805)	−4.21389 (4.967)	−4.14236 (4.648)

Mediator
Debt Maturity (DMR)					30.91784^*** (6.871)		42.55229^*** (8.859)	135.3171^*** (21.898)
Fixed Collateral (FC)						−12.32152^*** (4.235)	−28.69400^*** (5.015)	−0.84991 (2.689)

Moderator
DM^*FC								−140.8334^*** (21.898)
Year Effect	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Industry Effect	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
R²	0.24	0.25	0.06	0.06	0.06	0.06	0.07	0.08
Prob>chi²	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000

Mean, Standard Deviation and Correlations

	1	2	3	4	5	6	7	8	9	10	11
1) Insolvency Risk (IR)	1
2) Board Independence (BI)	0.0017	1
3) Non-duality (NDU)	0.0262	0.1321^*	1
4) Debt Maturity (DMR)	0.0390	0.0163	−0.0642^*	1
5) Fixed Collaterals (FC)	−0.0832^*	−0.1496^*	−0.1127^*	−0.4745^*	1
6) Size (SIZE)	−0.0092	0.2247^*	0.1168^*	0.0590^*	0.0021	1
7) Taxes (TAX)	0.0035	−0.0509	0.0046	0.0112	−0.0224	0.0354	1
8) Growth (FG)	−0.0030	0.0475	0.0420	0.0948^*	0.0361	0.0174	0.0086	1
9) Profitability (ROA)	0.0897^*	0.0622^*	0.0800^*	−0.0265	−0.1993^*	0.2091^*	0.0434	0.443	1
10) Volatility of returns (σROA))	−0.0598^*	0.0200	0.0524^*	−0.1519^*	−0.0369	−0.2670^*	0.0046	0.0018	0.0305	1
11) Liquidity (LIQ)	0.1498^*	0.0111	0.0115	−0.0407	−0.1809^*	−0.1223^*	0.0040	−0.0090	0.0349	0.0543^*	1
X	9.96	2.64	−	0.27	0.55	15.29	16.41	0.09	4.04	7.66	2.12
σ	76.86	0.24	−	0.21	0.22	1.76	0.43	0.48	16.23	10.44	10.08
N	1420	1420	1420	1420	1420	1420	1420	1420	1420	1420	1420

Results of hierarchical OLS regression with non-duality as IV

	Debt Maturity		Insolvency Risk

	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6	Model 7	Model 8
Control Variables
Size (SIZE)	0.00160 (0.003)	0.00224 (0.003)	−0.93308 (1.374)	−1.02897 (1.380)	−1.09899 (1.376)	−0.96605 (1.381)	−0.97568 (1.375)	−1.10897 (1.370)
Taxes (TAX)	0.00772 (0.011)	0.00769 (0.011)	−0.16607 (4.654)	−0.16175 (4.655)	−0.40188 (4.643)	−0.18751 (4.655)	−0.54600 (4.635)	−0.53800 (4.617)
Growth (FG)	0.04132^*** (0.010)	0.04205^*** (0.010)	−0.34973 (4.157)	−0.46025 (4.160)	−1.77269 (4.173)	−0.16476 (4.168)	−1.53567 (4.166)	−0.28125 (4.166)
Profitability (ROA)	−0.00013 (0.000)	−0.00011 (0.000)	0.36536^*** (0.131)	0.36229^*** (0.131)	0.36585^*** (0.131)	0.33794^** (0.133)	0.30989^** (0.132)	0.30508^** (0.132)
Volatility of returns (σROA)	−0.00289^*** (0.001)	−0.00280^*** (0.001)	−0.53881^*** (0.201)	−0.55181^*** (0.202)	−0.46419^** (0.204)	−0.55673^*** (0.202)	−0.44523^** (0.203)	−0.43472^** (0.203)
Liquidity (LIQ)	−0.00035 (0.001)	−0.00035 (0.001)	1.14943^*** (0.202)	1.14839^*** (0.202)	1.15940^*** (0.202)	1.10864^*** (0.205)	1.06987^*** (0.205)	1.13018^*** (0.205)

Independent Variable
Non-duality (NDU)		−0.02763^* (0.014)		4.14921 (5.797)	5.01171 (5.789)	3.58257 (5.818)	3.98121 (5.794)	3.77374 (5.771)

Mediator
Debt Maturity (DMR)					31.20601^*** (10.604)		42.07174^*** (11.469)	134.6859^*** (29.084)
Fixed Collateral (FC)						−11.74894 (10.398)	−27.59376^** (11.217)	0.16597 (13.751)

Moderator
DM^*FC								−140.6002^*** (40.604)
Year Effect	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Industry Effect	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
R²	0.24	0.24	0.06	0.06	0.06	0.06	0.07	0.08
Adjusted R²	0.23	0.23	0.04	0.04	0.05	0.04	0.05	0.06
F stat	19.29^***	18.67^***	3.75^***	3.61^***	3.84^***	3.52^***	3.93^***	4.26^***

Corporate board vigilance and insolvency risk: a mediated moderation model of debt maturity and fixed collaterals

Figures & Tables

Figure 1

Results of hierarchical PCSE regression with non-duality as IV

Results of hierarchical OLS regression with board independence as IV

j_ijme-2020-0032_apptab_001

j_ijme-2020-0032_apptab_002

Summarized Results

Results of hierarchical PCSE regression with board independence as IV

Mean, Standard Deviation and Correlations

Results of hierarchical OLS regression with non-duality as IV

Paradigm

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