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The impact of corporate governance quality on capital structure choices: does national governance quality matter?

Cogent economics & finance, 2022-12, Vol.10 (1) [Peer Reviewed Journal]

2022 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license. 2022 ;2022 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license. This work is licensed under the Creative Commons Attribution License http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 2332-2039 ;EISSN: 2332-2039 ;DOI: 10.1080/23322039.2022.2073003

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  • Title:
    The impact of corporate governance quality on capital structure choices: does national governance quality matter?
  • Author: Nguyen, An ; Nguyen, Tuan ; Hoang, Phuong
  • Subjects: Boards of directors ; Business ethics ; C23 ; Capital structure ; Corporate governance ; corporate governance quality ; Financial analysis ; Leverage ; national governance quality ; national institutions ; Stockholders
  • Is Part Of: Cogent economics & finance, 2022-12, Vol.10 (1)
  • Description: This research investigates the moderating effect of national governance quality on the corporate governance-capital structure decision relationship. Using an instrumental variable estimation technique to analyze a multinational dataset containing 23,142 firm-year observations of 3,270 firms in 59 economies from 2004 to 2014, we find evidence for the moderating role of national governance quality. Specifically, a well-functioning firm-level governance system tends to force managers to increase borrowing toward an optimal level for shareholders. The strength of the force, however, seems to decrease as national governance quality increases. Our findings suggest that a transparent and investor-friendly business environment created by the government may complement the firm-level corporate governance mechanism by reducing agency problems, thus reducing the need to use leverage as a tool to discipline managers. The results are robust to different proxies for national governance quality, corporate governance quality, and firm leverage.
  • Publisher: London: Cogent
  • Language: English
  • Identifier: ISSN: 2332-2039
    EISSN: 2332-2039
    DOI: 10.1080/23322039.2022.2073003
  • Source: DOAJ Directory of Open Access Journals
    AUTh Library subscriptions: ProQuest Central
    ROAD
    Taylor & Francis (Open access)
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