Corporate Governance and Capital Structure in Developing Countries: A Case Study of Bangladesh

HAQUE, F., ARUN, TG., & KIRKPATRICK, C. (2011) Corporate governance and capital structure in developing countries: a case study of Bangladesh. Applied Economics 43, pp. 673-681.

17 Pages Posted: 19 Sep 2017

See all articles by Faizul Haque

Faizul Haque

Edinburgh Business School

Thankom Gopinath Arun

University of Central Lancashire

Colin Kirkpatrick

University of Manchester - Institute for Development Policy and Management (IDPM)

Date Written: 2011

Abstract

The paper investigates the influence of firm-level corporate governance on the capital structure pattern of non-financial listed firms using Bangladesh’s case study. The agency theory suggests that better corporate governance will reduce agency costs and improve investors’ confidence, which in turn enhances the firm’s ability to gain access to equity finance, leading to the firm’s less dependence on debt finance. Alternatively, 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.

Keywords: Corporate Governance Index, Agency Theory, Debt Finance, Banks, Bangladesh

JEL Classification: G28, G30, G32, G34, G38

Suggested Citation

Haque, Faizul and Arun, Thankom Gopinath and Kirkpatrick, Colin, Corporate Governance and Capital Structure in Developing Countries: A Case Study of Bangladesh (2011). HAQUE, F., ARUN, TG., & KIRKPATRICK, C. (2011) Corporate governance and capital structure in developing countries: a case study of Bangladesh. Applied Economics 43, pp. 673-681.. Available at SSRN: https://ssrn.com/abstract=3037895

Faizul Haque (Contact Author)

Edinburgh Business School ( email )

Riccarton
Edinburgh, Scotland EH14 4AS
United Kingdom

Thankom Gopinath Arun

University of Central Lancashire ( email )

United Kingdom

Colin Kirkpatrick

University of Manchester - Institute for Development Policy and Management (IDPM) ( email )

Manchester M13 9GH
United Kingdom
0161 275 2808 (Phone)
0161 273 8829 (Fax)

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