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Corporate governance and capital structure in developing countries: a case study of Bangladesh

Corporate governance and capital structure in developing countries: a case study of Bangladesh
Corporate governance and capital structure in developing countries: a case study of Bangladesh
This paper investigates the influence of firm-level corporate governance on the capital structure pattern of non-financial listed firms, using a case study of Bangladesh. The agency theory suggests that better corporate governance will reduce agency costs and improve investor confidence, which in turn will enhance the ability of a firm to gain access to equity finance, reducing dependence on debt finance. Conversely, the controlling shareholders of poorly governed firms are likely to prefer debt, in order to retain absolute ownership and control rights. The OLS regression framework uses a questionnaire-survey based Corporate Governance Index (CGI). The study results seem to support agency theory, with a statistically significant inverse relationship between corporate governance quality and the total as well as long-term debt ratios.
0003-6846
673-681
Haque, Faizul
8153d83c-427a-4f73-860d-dd7e9460533d
Arun, Thankom Gopinath
b2cc6cb9-9cfb-4f44-acba-1ee8270398bf
Kirkpatrick, Colin
770c13ce-54d6-404c-868a-7dfa23cea898
Haque, Faizul
8153d83c-427a-4f73-860d-dd7e9460533d
Arun, Thankom Gopinath
b2cc6cb9-9cfb-4f44-acba-1ee8270398bf
Kirkpatrick, Colin
770c13ce-54d6-404c-868a-7dfa23cea898

Haque, Faizul, Arun, Thankom Gopinath and Kirkpatrick, Colin (2011) Corporate governance and capital structure in developing countries: a case study of Bangladesh. Applied Economics, 43 (6), 673-681. (doi:10.1080/00036840802599909).

Record type: Article

Abstract

This paper investigates the influence of firm-level corporate governance on the capital structure pattern of non-financial listed firms, using a case study of Bangladesh. The agency theory suggests that better corporate governance will reduce agency costs and improve investor confidence, which in turn will enhance the ability of a firm to gain access to equity finance, reducing dependence on debt finance. Conversely, the controlling shareholders of poorly governed firms are likely to prefer debt, in order to retain absolute ownership and control rights. The OLS regression framework uses a questionnaire-survey based Corporate Governance Index (CGI). The study results seem to support agency theory, with a statistically significant inverse relationship between corporate governance quality and the total as well as long-term debt ratios.

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More information

e-pub ahead of print date: 16 June 2009
Published date: 1 March 2011

Identifiers

Local EPrints ID: 446495
URI: http://eprints.soton.ac.uk/id/eprint/446495
ISSN: 0003-6846
PURE UUID: baccab19-8256-4b1d-8a38-d4377f741f62
ORCID for Faizul Haque: ORCID iD orcid.org/0000-0003-1556-3466

Catalogue record

Date deposited: 11 Feb 2021 17:33
Last modified: 09 Jan 2022 04:12

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Contributors

Author: Faizul Haque ORCID iD
Author: Thankom Gopinath Arun
Author: Colin Kirkpatrick

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