Does corporate governance lead to a change in the capital structure?

Abstract

The study investigates the relationship between corporate governance and capital structure of randomly selected 19 banks of Pakistan. The data was collected from financial statements issued by financial institution and multiple regression model was applied to find the relationship between the variables. Results show that there is no relationship between corporate governance and capital structure in the banking sector of Pakistan. Furthermore, our findings show that all independent variables are positively related with capital structure except ownership concentration which affects adversely to capital structure but overall there is an insignificant relationship between capital structure and corporate governance.

How Does Board Structure Characteristics Affect Capital Structure Decisions? Evidence from East African Stock Markets

“…This results is consistent with prior empirical results reported by Rehman et al (2010).H1b predicts a statistically significant positive relationship between board structure characteristics (BSC) and long term debt ratio (LTDR).H1b was rejected in our current research, as the coefficient on board structure characteristics index (BSCI) is negatively and statistically significant. This result is consistent with prior empirical results reported by Abor and Biekpe (2007).…”

“…Finally, table 11 reported the prob>chi2 of 0.000 at 5% significance level, suggesting that our model 1a-STDR is statistically significant. Our empirical results are consistent with prior empirical study reported by Rehman et al (2010), therefore, we rejected the hypothesis H1a. Table 12 presents the regression results from the Panel Corrected Standard Errors (PCSEs) for Model 1b-LTDR.The results indicates that board structure characteristics index (BSCI) has a statistically significant effect on capital structure decision of East African listed firms as measured by long term debt ratio (LTDR) at 5% significance level.…”

“…Finally, the firm size (SIZ) measured as natural logarithm of total assets is 23; this indicates that East African listed firms are large firms in average as measured in terms of total assets. Rehman et al (2010). Moreover, this results is inconsistency with the research dependence theory (RDT) which suggested that the BOD are key person to bring required resources (e.g.…”

“…Moreover, other researcher like Hussainey and Aljifri (2007), using listed firms in United Arabs of Emirates (UAE) did not find significant impact of BSC (board size) on CSD, Rehman et al, (2010), using 19 selected firms in Pakistan did not find significant impact of BSC (board independence) on CSD. Furthermore, Kajananthan (2012), using 28 selected manufacturing listed firms in Sri Lanka did not find any significant effect of BSC (board meeting) on CSD, Priya and Nimalathasan (2013), using 15 selected hotels and restaurant in Sri Lanka they documented insignificant effects of BSC (board of directors meeting, CEO duality, board composition and board size) on CSD from 2008, Brenni (2014, using 26 UK listed real estate firms listed in London stock exchange documented insignificant effects of BSC (non-executive directors and CEO duality) on CSD from 2000-2009and Chitiavi et al, (2013, using Kenyans firms listed at Nairobi securities exchange they documented insignificant effects of BSC (both board size and board independence) on CSD from 2007-2011.…”

Corporate Governance Practices and Capital Structure: A Case in Sri Lanka

“…In contrast, Lipton and Llorsch (1992) found that, there is a significant relationship between capital structure and board size. In the supportive way to the findings of Lipton and Llorech, scholars in the finance noted that, corporate governance practices has the significant relationship with capital structure in terms leverage decision in the top level management (Pfeffer & Salancick ,1978;Wen , Rwegasir, & Bilderbeek ,2002;Abor ,2007;Rehman., Rehman, & Raoof , 2010 ). Further, Berger, Ofek, & Yermack (1997) found that firms with larger board membership have low leverage or debt ratio.…”