EFFECT OF CORPORATE GOVERNANCE ON CAPITAL STRUCTURE: CASE OF THE SRILANKAN LISTED MANUFACTURING COMPANIES
Keywords:
Corporate Governance, Capital Structure, Colombo Stock Exchange, Multiple Liner RegressionAbstract
The issue of corporate governance has been a growing area of management research especially among large and listed firms. Companies need financial resources to promote their objectives. Therefore, factors may affect the capital structure of companies should be considered carefully. The purpose of the present is to investigate whether there is any relationship between some specific features of corporate governance and capital structure of listed manufacturing firms in Colombo stock exchange. To do so 28 manufacturing companies were selected from those which were listed in Colombo stock exchange during the period of 2009 until 2011 as the sample of the study. The independent variables of the study included 'board size', 'board structure' ‘board meeting ‘and 'proportion of independent non executive directors' while the dependent variable was decided to be 'debt ratio' (as a criterion for capital structure). The variables were empirically tested by multiple regression analysis. This found that corporate governance practices have 34% impact on capital structure and among the corporate governance variables board committee has a significant effect on firms’ capital structure.
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