The relationship between capital structure and corporate governance in a UK context

Balaam, Katie Jane (2018) The relationship between capital structure and corporate governance in a UK context. Doctoral thesis, Birkbeck, University of London.

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Abstract

The extensive research in the field of capital structure provides a starting point to build upon within this research, to re-examine the relationship between capital structure and corporate governance for the period 2003-2012 for FTSE 350 companies. Previously investigated independent variables will be re-examined in the UK context, for example, gender of the CEO and the Board of Directors, size of the board, number of board meetings, board meeting attendance and managerial ownership. Previously, the focus has been on the relationship between the determinants and company performance. Prior studies focus on the use of single equation modelling (Berger et al., 1997; Fosberg, 2004; Malmendier et al., 2011; Ahern and Dittmar, 2012; Yim, 2013). The contribution of this study is three fold. Firstly, the use of both single and dynamic modelling allows for a more detailed analysis of the potential determinants on capital structure to emerge. Secondly, the use of several definitions of gearing enables a study into whether the duration of debt is one attribute in the capital structure puzzle. Thirdly, the use of comprehensive corporate governance factors including board structure, CEO characteristics, and ownership structure enable a wider number of independent variables to be included within the capital structure debate. In relation to CEO age the study finds evidence that CEOs are demonstrating a difference in risk levels between short-term and long-term debt levels, with older CEOs being at risk of entrenchment. As the tenure period of the CEO increases the level of debt decreases, in line with managerial entrenchment theory. In relation to board characteristics; the size of the board, level of independence and meeting attendance, lead to a reduction in the uptake of debt. The number of board meetings is found to have a positive impact on the leverage levels; the increase in the time available to discuss options is found to have the opposite effect on debt levels. Differences have become apparent in this study between the relationship with key corporate governance variables, and the length of time that debt is taken out. In the case of the variable duality, levels of short-term debt increase, while long-term debt decreases. A negative relationship is identified between the proportion of compensation received by the CEO and leverage levels.

Item Type: Thesis (Doctoral)
Copyright Holders: The copyright of this thesis rests with the author, who asserts his/her right to be known as such according to the Copyright Designs and Patents Act 1988. No dealing with the thesis contrary to the copyright or moral rights of the author is permitted.
School/Department: School of Business, Economics & Informatics > Management
Depositing User: ORBIT Editor
Date Deposited: 03 Jan 2019 17:19
Last Modified: 03 Jan 2019 17:19
URI: http://bbktheses.da.ulcc.ac.uk/id/eprint/373

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