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RESEARCH PRODUCT

The role of internal corporate governance mechanisms on default risk: A systematic review for different institutional settings

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Recent financial downturns, characterized by the significant failures of firms, have revealed the need to control credit risk. Latest literature has shown that weak corporate governance structures are related to high levels of default risk, leading to financial instability. In this context, we aim to summarize the literature that focuses on the role that internal corporate governance plays in the credit risk of firms, specifically considering three corporate governance components: ownership structure, board structure and financial stakeholders’ rights and relations. Additionally, we analyse whether the effectiveness of the internal mechanisms depends on particular key factors, especially the institutional setting and the type of mechanisms considered. Finally, new lines of research are identified for future research. The authors acknowledge financial support from the Fundación Ramón Areces. Laura Ballester acknowledge financial support from the Spanish Ministry of Science, Innovation and Universities and FEDER project PGC2018-093645-B-I00. In addition, Laura Ballester and Ana González-Urteaga acknowledge financial support from the Spanish Ministry of Science, Innovation and Universities through grant PGC2018-095072-B-I00 , and Ana González-Urteaga and Beatriz Martínez acknowledge financial support from the Ministry of Economics and Competitiveness through grants ECO2016-77631-R (AEI/FEDER.UE) and PID2019-104304GB-I00 and UPNA Research Grant for Young Researchers, Edition 2018.