Impact of Ownership Structure and Corporate Governance on Capital Structure of Pakistani Listed Companies

International Journal of Business & Management, Vol. 4, No. 2, Feb. 2009

8 Pages Posted: 2 Jan 2011

See all articles by Safdar A. Butt

Safdar A. Butt

Capital University of Science & Technology, Islamabad; Pak Agro Packaging Private Ltd; Hi Tech Lubricant Ltd

Arshad Hasan

Capital University of Science and Technology

Date Written: February 1, 2009

Abstract

This paper explores the relationship between corporate governance and capital structure of listed companies in an emerging equity market, Pakistan. The study covers the period 2002 to 2005 for which firm level data for 58 randomly selected non-financial listed companies from Karachi Stock Exchange has been examined by using multivariate regression analysis under fixed effect model approach. Measures of corporate governance employed are board size, board composition, and CEO/Chair duality. Impact of shareholding on financing decisions has also been examined by using managerial shareholding and institutional shareholding. Similarly influence of controlled variables like firm size and profitability on firms’ financing mechanism is also investigated. Results reveal that board size and managerial shareholding is significantly negatively correlated with debt to equity ratio. However corporate’s financing behavior is not found significantly influenced by CEO/Chair duality and the presence of non-executive directors on the board. However, control variables firm size and return on assets are found to have a significant effect on capital structure. No temporal effects are observed. Therefore results suggest that corporate governance variables like size and ownership structure and managerial shareholding play important role in determination of financial mix of the firms.

Keywords: Corporate governance, Ownership structure, Capital structure

Suggested Citation

Butt, Safdar Ali and Hasan, Arshad, Impact of Ownership Structure and Corporate Governance on Capital Structure of Pakistani Listed Companies (February 1, 2009). International Journal of Business & Management, Vol. 4, No. 2, Feb. 2009, Available at SSRN: https://ssrn.com/abstract=1732511

Safdar Ali Butt (Contact Author)

Capital University of Science & Technology, Islamabad ( email )

Islamabad Expressway, Near Kakpul
Kahuta Road,
Islamabad, ICT 44000
Pakistan
+92-51- (Phone)

HOME PAGE: http://www.jinnah.edu.pk

Pak Agro Packaging Private Ltd ( email )

Suite 2, CTC Center
Street 9, G-8/2
Islamabad, ICT 44000
Pakistan

Hi Tech Lubricant Ltd ( email )

1A Danepur Raod
GOR,
Lahore, Pakistan, 44000
Pakistan

Arshad Hasan

Capital University of Science and Technology ( email )

Islamabad
Islamabad, Fedral
Pakistan

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