Corporate Governance Criteria and Capital Structure: A Content Analysis

The content analysis by researchers reveals the influence of institutional and firm level criteria of quality of corporate governance on capital structure decisions of the firms. The quality of funding decisions depends on how the governance codes and rules are put to use by the board of directors. The board efficiencies which explain the governance qualities were found to be relevant in deciding the capital structure. The paper observes most significant criteria of corporate governance to be, size of the board, proportion of non-executive directors in the board and the ownership structure. The CEO/Chairman Duality was however observed to be insignificant in deciding capital structure. It is established that good corporate governance helps in mitigating agency problem and contributes in protecting interests of shareholders. The performance of board related attributes can be enhanced by imparting proper training and providing a strong ethical framework in which the board operates. This in turn will improve the quality of funding decisions.