Tourani Rad, AKoerniadi, H2014-02-032014-02-032014-02-032014-02-0320132013Second International Conference on Advances in Management and Economics held at Holiday Inn, Dubai, 2013-02-01 to 2013-02-02https://hdl.handle.net/10292/6685In 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.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).Corporate governanceFinancing policyCost of capitalConference ContributionOpenAccess