Investigating the Relationship between Corporate Governance Characteristics and Financing Decisions

Document Type: Original Research


Faculty member of Accounting, Baft Higher Education Center, Shahid Bahonar University of Kerman, Kerman, Iran


This paper investigates the relationship between the components of corporate governance structure including board characteristics, ownership structure, and financial leverage in the companies listed on Tehran Stock Exchange. The aim to this study is to examine the impact of board size, percent of non-executive directors, CEO-Chairman duality, percent of managerial ownership, institutional ownership, and governmental ownership on financial leverage of companies listed on Tehran Stock Exchange .In order to investigate research hypotheses, the data of 133 companies listed on Tehran Stock Exchange during the period of 2006 to 2014 has been investigated by implementing regression models based on panel data. In order to measure financial leverage, total debt ratio and the ratio of long-term debt to total assets were used. The results obtained from research indicate that there is a statistically significant and positive relationship between board size, the percentage of non-executive directors, and institutional ownership, CEO-Chairman duality and financial leverage; while, there is a significant and negative relationship between managerial ownership and financial leverage. Also, there is a significant and negative relation between long-term debt ratio and governmental ownership, while no significant relationship was found between total debt ratio and governmental ownership. Altogether, these findings prove the significant role of board characteristics and ownership structure on financing decisions made by firms. 


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