Risk governance, financial distress, and firm performance: panel evidence across pre- and post-pandemic periods in an emerging market

This study revisits the relationship between risk governance, financial distress, and firm performance using a panel dataset of Indonesian consumer cyclicals firms over the period 2018–2024. Addressing prior limitations in measurement validity and econometric design, risk governance is operationalised as a multidimensional index, while financial distress is measured by the continuous Altman Z-score, with additional robustness checks. Employing fixed effects panel estimation with clustered standard errors, the study accounts for unobserved heterogeneity and serial correlation. The results show that risk governance has a positive and significant effect on firm performance, whereas financial distress exerts a consistently negative impact. In contrast, director tenure does not significantly moderate these relationships, suggesting that board experience is not a universally effective governance mechanism in dynamic economic environments. Robustness tests using alternative specifications of financial distress, firm performance, and director tenure confirm the stability of these findings. Overall, the study demonstrates that governance effectiveness is contingent on economic conditions rather than solely determined by formal structures or tenure-based attributes, contributing to a more nuanced understanding of governance–performance relationships in emerging markets.