Corporate governance, financing patterns, and the cost of capital

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(237.93 KB)
Date
2013
Authors
Tourani Rad, A
Koerniadi, H
Supervisor
Item type
Conference Contribution
Degree name
Journal Title
Journal ISSN
Volume Title
Publisher
Center for Applied Social Sciences and Research (CASSR)
Abstract

In this paper, we examine the effects of corporate governance mechanisms on financing policies in a research setting where agency problems and external financing constraints are expected to be high and restrictive. Using a unique self-constructed corporate governance index and employing the Fama and French (1999) financing model of firms, we find that firms with weak corporate governance mechanisms have more leverage than do firms with strong governance mechanisms. After controlling for the effects among corporate governance components, we observe that firms with different levels of corporate governance quality use different corporate governance mechanisms in relation to their financing policies. Our results suggest that firms can dynamically adjust their leverage as a governance mechanism through compensation policy and shareholder rights.

Description
Keywords
Corporate governance , Financing policy , Cost of capital
Source
Second International Conference on Advances in Management and Economics held at Holiday Inn, Dubai, 2013-02-01 to 2013-02-02
DOI
Publisher's version
http://www.cassr.com/
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NOTICE: this is the author’s version of a work that was accepted for publication. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in (see Citation). The original publication is available at (see Publisher's Version).
Permanent link
https://hdl.handle.net/10292/6685
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